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Mutual Funds - Mutual Funds.
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Posted by on June 9, 2008, 9:36 am
Now, buy insurance for as low as Rs 49 at a mall near you
Expanding middle class plus increasing disposable incomes has lead to
a booming retail market in India. According
to NCAER's, or National Council of Applied Economic Research, Great
Indian Market Survey, organised retail, which
was worth 5,200 crore in 2007, is set to grow to 37,400 crore in
2012.
One such union is between India=92s Future Group and Italy-based
Generali Insurance who have come together to
form India=92s newest insurance distribution model -- Mallassurance.
This will now be one stop shop for all your
shopping as well as insurance needs.
Rs 49-99-149, no these are not price tags in a dollar store, but they
are the premium costs of insurance policies
that can now be purchased from shopping malls. Future Generali has
approached the Indian insurance market in a
unique way through insurance kiosk in your neighbourhood mall. So, you
can insure your home, car, or self from
accidents while buying vegetables and that could be for as less as Rs
49.
Kishore Biyani, Group CEO, Future Group, said, "Acquiring a customer
younger and making him aware of insurance as
a product is our first job. We believe we can do it in a mall space
because today malls are a public space where
people spend a lot of time. They are coming to do every activity out
here and we believe that if we explain a
product and not try to sell them big things on day one will help."
Sergio Balbinot, CEO, Generali Group, said, "The first issue would be
awareness of insurance, which is something
that you can see. It is not something obstructed. Life is the issue
because there is a pension element even in
India. In India, we will also have a big part also for non-life
insurance not only for life."
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Excerpts from CNBC-TV18=92s exclusive interview with Kishore Biyani and
Sergio Balbinot:
Q: You are one of the later entrants as far as the Indian insurance
market is concerned. We all know that its one
of the fastest growing markets, there was a little slowdown last year
as compared to the aggressive about 100%
growth. Are you still bullish on the Indian insurance industry because
our penetration levels are extreme at this
point of time?
Balbinot: India is not just a big country, a big population as well.
There are tremendous opportunities for an
insurance company. 50% of the population is below 25 years old. We
have a middle class, which is coming up.
These are potential buyers for an insurance company. If we see the
penetration ratio, it is very low in life. In
non-life, it is half compared of what we see in other countries. The
saving ratio is very high; it is typical of Asian
countries. We need to have a big business. In a country like India one
can never say, =93You are too late.=94
Q: Is it one of the reasons why penetration is so low here because we
by definition are very fatalistic people. We
do not believe we would ever die, so we don't need insurance. Whether
it is our plasma television which we may
buy for lakhs of rupees but do not want to pay Rs 99,000 for covering
that or it is our own life, we believe that
nothing is going to happen to us, is that what is the reason?
Biyani: We have made this product a little complicated and non-
glamorous. There is no approach, so how do you
sell these products. Acquiring a young customer and making him aware
of insurance as a product is our first job.
We believe we can do it in a mall space because today malls are a
public space where people spend a lot of time.
They are coming there to do almost every activity. We believe that if
we explain a product and not try to sell them
big things on day one it would help.
Q: How do you plan to do that?
Biyani: We want to expose the product to them and make it as simple as
possible. We are building a kiosk wherein
you can put in money and buy a policy on the spot.
Q: Would that be an accident policy?
Biyani: We can do a home insurance policy in that manner. But then
once a relationship with a customer is built, it
is for us to make him aware of more products. We have to start a
relationship with a product; it cannot be started
at a bigger level.
Q: Do you agree that one of the reasons in our country why insurance
probably hasn=92t penetrated is because it has
been very largely agent-distributor driven and is driven largely by
commissions. So, it is always been about how
many agents you have. We have a system here that every insurance
company can have only one tied agent. So,
do you feel that distribution or the manner in which insurance is been
sold in this country is one of the reasons for
low penetration?
Balbinot: It=92s part of the issue. Agent distribution is a typical
format that you have in many countries. You still have
agents in Europe and in United States. But, what's important is the
evolution of distribution. The idea of
Mallassurance is very interesting for our customers.
Q: How has it worked overseas in other markets?
Balbinot: It=92s always difficult to make comparison country by country
because it depends on the mall, its location,
attitude of the customers, and their awareness of insurance. For
example in UK, a corporation between Tesco and
Royal Bank of Scotland is something which is very attractive at the
moment. They have 2 million customers, and
800 million premium income originating from Mallassurance
distribution. We have something similar in France with
Carrefour. We at Generali are still working with Migros in Switzerland
and Italy. So, the Mallassurance is coming as
another distribution part of Generali because we still will have
agents.
Its not that in India we say, =93We don=92t need agent.=94 We will need the
agent but Mallassurance will be something
that we are on. Especially, Future Group which has come to India as
an innovator.
Q: If I am coming to your mall and buying the insurance product after
going through whatever I see there, as you
said it will be simple products and easier to understand, why then do
I need to go to an agent? Do I as a consumer
then stand to benefit?
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Biyani: We have an array and bouquet of products. So, an agent is
required to explain a product. But our future
money outlets, which we are building in every mall to sell insurance,
will have promoters and advisers who will
advice people on what polices to buy.
Q: Is advice not selling necessarily?
Biyani: Advisory leads to selling. But the approach is basically every
human being has a different need.
Q: You feel that almost a percent of the people who are walking into
your malls could actually be converted into
buying insurance, is that right?
Biyani: It is more than that, around 3-4%.
Q: When you talk of global experiences is there a 3-4% conversion rate
or is it much more?
Balbinot: It is difficult to make a comparison. Even in a mall, we
have a completely different approach in Europe
than in Asia. In Europe, you see a mall, go buy, and then exit. Here
it is different. You enter, buy, have lunch or
dinner, and have entertainment. So, it is a place where you spend time
with your family. It is a very important
point, because you come with your family here. Insurance is mostly an
issue that you have to discuss with your
family, it is not an individual decision of one member of the family.
So, there are some elements that will make
Mallassurance in India much more attractive that we have seen in other
countries.
Q: The numbers say that almost about 17% of your business as a group
comes out of Mallassurance. Do you see
that number being much higher in India as far as your joint venture is
concerned?
Biyani: We are looking at much higher number, at least 17%. But it is
too early to talk about numbers. Our initial
test launch has been quite successful. We just had a test launch in
the last two days in 20 stores. We have done
more than around 10,000 policies in the last few days, i.e. in three
days of our launch. From tomorrow onwards, we
will be moving into 40 stores. We have more than 500 outlets where we
can move in as far as possible. Once we
have our distribution points, then in the next 40-45 days the first
target for us is 1,00,000 customers.
Q: Is the whole idea of getting into insurance in sync with your
retail business or is this something that you are
going to look at completely in isolation? Of course, Mallassurance
fits in beautifully with that.
Biyani: The way we have designed our Future Group is to capture the
spend of Indian consumers. Our aim is to
spend, insure, and protect them. A financial services product is also
an important product in the life of our
customer=92s balance sheet and we want to be a part of this. So, it is a
part of our financial services strategy
wherein insurance fits very well with us.
: In general insurance, we tend to talk a lot more about life
insurance but tend to ignore the general insurance
side of it. Do you see Mallassurance being a bigger driver there
rather than on the life insurance side?
Balbinot: The first issue would be awareness. Awareness of insurance
is something that you can see, it is not
something obstructed. Life is the issue because there is no pension
element in India. We also have a big need for
non-life insurance here.
Q: You have always brought in price points which have defied the
market, do you intend doing the same here. From
your test market points what is the feedback one can take away from
consumers?
Biyani: We have launched a product at Rs 99, and at Rs 199. We are
looking at one at Rs 49. These are interesting
price points to acquire a customer.
Q: Similar product to product, how do they compare with others at the
current levels?
Biyani: We normally like to prototype and test out what suits the
Indian customer. The response has been good
and that=92s how we decide on what price point works best.
Q: So for Rs 49, I can buy an insurance cover?
Biyani: That=92s the whole idea. How to acquire a customer at an
interesting price point, build up a base, and make
the customer aware of various products, which you have?
Q: If you compare point to point, how do you find our insurance market
compared to the global market? It=92s a fairly
mature market now with private life insurance being around for about
8-9 years in India. Do you believe that it=92s
still a little overpriced as far as charges are concerned?
Balbinot: In a market, there is a cycle of insurance. You are in a
free situation and competition. The market is
growing on a sustainable rate for the next 10-20 years. This market
can grow roughly 20% per year.
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Q: Give me a sense of the kind of capital you expect to bring in?
Biyani: Insurance was decided two years ago. There are two entities of
Future Group which are invested into this
business. We have made a decent aggressive business plan. Arrangements
have been made for whatever capital
will be required. Capital will be required every passing year, so we
will have to take it as it comes. Our initial outlay
has started and now we move into the next round.
Q: Are you going to launch it across 40 stores to start with?
Biyani: 40 stores should start by tomorrow.
Q: What do you see going forward in the next one year?
Biyani: We are looking at around 120 cities in India where we have
stores including Godrej Adhar, which we recently
got into. We are operating in around 55 cities. With that we will be
penetrating 110 cities with this product. It can
go into more than 1,000 outlets of ours but we will start with 500
outlets.
Q. When I talk of life insurance, is this more a touch point where I
am more followed up later by an agent or is it
also some place where I can just close my deal there and then?
Balbinot:: You can close the deal if you want. We have technology
where you can come in, buy, and get out with
a policy. So, technology helps quite a lot in this respect. But for a
life business, it=92s important that you have a
discussion with a person. It=92s not something impulsive that you go and
buy. Life insurance is something where you
think for the future. It is at this very important point that you have
people inside that can help you in
understanding things. So, nobody is forcing you, but you can have a
discussion.
Q: So, your Kiosk is going to have a financial planner there?
Balbinot: We will be having financial planner for sure.
Q: In the Indian context, since a mall visit is more a family affair,
as against internationally, do you see a lot more
conversion?
Balbinot: It=92s a family affair. People here spend much more time than
in Europe. This is important. You have the
time to discuss and are not in hurry. You don=92t just go in and get out
as you see sometimes in continental Europe.
This is fundamental point to make.
Q: Most insurance companies including the foreign partners who have
come into India, seem to be bullish on just
the ULIP side of it. That means the term cover business. The pure risk
insurance is something which is abysmally
low in this country. That at the end of the day is a far simpler
product because its just pure risk that you are
buying and not really getting into the whole investment side of it. Is
that one area where you see Mallassurance
can make a difference because it=92s a simple straight risk?
Balbinot: That=92s absolutely right. The term business is something,
which is easy to sell and understand, and
something you can sell in a mall without any problems. But, we have to
think not just on this kind of problems.
Q: I am not saying you would only focus on one, but does term cover
become far more aggressively sold through a
mall insurance booth?
Biyani: In malls, we can easily experiment with lot of customers,
introduce a product and test it out, look at the
feedback and create products, which suit the customer. That=92s the
spirit of new products, which is supposed to be
looked upon by us quite interestingly.
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