Rs. 100 million question
Since June 2005, Prudential Insurance has a new CEO. What is the future outlook?
Collecting about Rs. 70 million as the gross premium, Prudential Insurance was doing well in 2004-05, the third year of its operation. Rather, the feat can be regarded very good when viewed against the fact that the company is not receiving any business from the aviation sector, the single largest contributor of premium to the country’s general insurance business. The figure is respectable also when it is compared to those of the competitors who started business almost at the same time as Prudential.
The promoters, however, had to go for a CEO change in line with the policy of the Beema Samiti (the regulator of the insurance business) to encourage local experts and restrict foreign personnel to three years. When Raghu Pant replaced Ranjit Mukherjee (an Indian professional, who had been working as the CEO from the company’s inception), he found that though the company’s premium collection was good, there was loss in the reinsurance and the underwriting profit was not as expected.
“To increase underwriting profit, it was obvious that something needed to be done in the reinsurance treaty and claims settlement process,” recalls Pant. As treaty period starts from mid-July, the timing of Pant’s joining the company was ideal. As he already had a good knowledge about reinsurance and good acquaintance with the brokers, he could easily negotiate a new reinsurance treaty which was better than the earlier one. His special experience in the reinsurance, gained while working in the state-owned Rastriya Beema Sansthan, came handy in this regard.
Meanwhile the Company has set a target of collecting Rs.100 million gross premium for the current financial year 2005-06. Pant says that his focus will be more on providing quality insurance service in the most professional manner by boosting customers’ confidence and corporate culture rather than on achieving the premium target only. “We’ll surely try to achieve that, but we would like to approach it by healthy competition,” he says.
A market already crowded with 16 players and a few more in the pipeline, the general insurance sector is experiencing some unhealthy competition by way of rate cutting below the tariff fixed by the Insurance Board (Beema Samiti) and providing insurance coverage on credit. This is surely posing hurdles in Pant’s plan. Pant says, “There are a good number of competitors who are trying to do business the healthy way. We want to work together and promote healthy competition.”
Pant’s problem with achieving the Rs. 100 million target is further compounded by the fact that it is very difficult for him to obtain aviation insurance as most of the airlines are somehow associated with one or another insurance company. Moreover, some of the promoters of Prudential have been receiving insurance services from other players and are very comfortable with them.
“Therefore, I will have to start marketing with my own promoters. As they have been receiving services from other companies, it will take some time before their business can be transferred to Prudential, and I am very optimistic about that,” he says. “This is going to be the first test of my insurance marketing skills.” Prior to joining Prudential, Pant was General Manager (Marketing) of Himalayan General Insurance.
The problem, however, is further complicated because some of the Prudential promoters are promoters of other insurance companies as well. But Pant has a strategy for that problem too. “We can go in for Co-insurance under which more than one company provides insurance coverage to the same property by sharing the premium and liability.”
Pant feels fortunate that the previous management had made significant contribution to enhance the professional skills of Prudential employees. Many of them were sent to various short and long-term insurance trainings and seminars which encouraged them to sit for exams conducted by the Insurance Institute of India. Some of them have even passed a few subjects. This professionally competent human resource can be used now for both upgrading the corporate culture as well as customer confidence, he thinks. Therefore, he is planning to promote some of these people to senior levels. “Some have already been promoted,” he notes and explains that this will also work as a strong motivation for the staff as there are still several vacant senior level positions.
Though Pant says that he has designed some new products to be launched in the market to achieve the Rs. 100 million target, he refuses to divulge the details. “Rs. 100 million is in fact a psychological figure. It gives the staff a target, and the customers will have better confidence in the company when we show them that we are approaching such a figure. But more important is employee morale and motivation and confidence of the customer. Therefore, we will be focusing more on those lines,” he adds.
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