Even in current crisis, insurance penetration has not gone up as per expectations – Mr Tapan Singhel, MD&CEO – Bajaj Allianz General Insurance

Update on the Indian Equity Market:

On Monday, Nifty closed marginally negative (-0.13%) at 9,239. Within NIFTY50, HEROMOTOCO (+6.1%), TATAMOTORS (+5.9%), and INFRATEL (+5.9%) were the top gainers, while ICICIBANK (-4.6%), BPCL (-3.2%) and DRREDDY (-3.0%) were the top losers. Among the sectoral indices,AUTO (+4.3%), MEDIA (+2.7%) and IT (+1.4%) gained the most. PVT BANK (-2.2%), BANK (-2.1%) and FIN SERVICE (-1.8%) were the top losers.

Even in current crisis, insurance penetration has not gone up as per expectations – Mr Tapan Singhel, MD&CEO – Bajaj Allianz General Insurance

Excerpts of an interview with Mr.Tapan Singhel, MD&CEO- Bajaj Allianz General Insurance (Part of Bajaj Finserv) published in Business Standard dated 11^th May 2020:

• The staff of Bajaj Allianz General Insurance (BAGIC) was prepared when the lockdown started as they had gone into Work from home (WFH) before the lockdown was announced.
• During the lockdown, BAGIC has issued around 1.7 mn policies and settled around 900,000 claims.
• BAGIC has seen that people are more productive in the WFH structure. If that continues, WFH may become the new norm.
• BAGIC’s growth for FY19 has been 16% vs. industry growth of 9%.
• Many enquiries are coming up in the retail health segment. Health policies have Covid-19 cover even now. But the spike in health product sales has not been as much as could be expected. This is surprising given the already low penetration levels of health insurance in India.
• Among other insurance segments, property business has seen positive movement. Motor business is down 40-50% as new car sales have paused.
• Due to the current crisis, 2 business segments should ideally see a spike that hasn’t happened yet. For the current prices of health insurance products, people should queue to buy cover. But that exponential growth hasn’t panned out as it should in the current scenario. Secondly, cyber insurance cover should also spike given that cyber crimes have moved up 1000%. Even then, there is hardly any sale of individual cyber cover with an annual premium of Rs 700 for a cover of Rs 1 lakh.
• In the lockdown period, claims on existing health policies have reduced as most hospitals are operating at 30-50% occupancy. Covid-19 claims haven’t moved up significantly either.
• Mr.  Singhel is of the opinion that there should be a regulator for hospitals to ensure standardization of rates. Insurance companies do their part by negotiating with hospitals to get standardized rates. In the end, the customer has to pay. If claims ratios go up, insurance companies will increase the prices of products. Customers will be burdened by that.

Consensus Estimate: (Source: market screener website)

• The closing price of BAJAJFINSV was ₹ 4,565/- as of 11^thMay 2020. It traded at 2.1x/ 1.8x the consensus BVPS estimate of ₹ 2,173/ 2,583 for FY21E/ FY22E respectively.
• Consensus target price of ₹ 8,305/- implies a PB multiple of 3.2x on FY22E BVPS of ₹ 2,583.

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