The non-life insurance market today is dominated byfierce competition for market share. The share of the private players has exceeded 20% of the total market. Endless growth in the range of the products on offer has further intensified the competitive nature of the market. Subsidizing the tariff-rated business by discounting the non-tariff class, low deductibles, more generous terms and conditions have all increased the price sensitivity of the clients. This has resulted in tremendous increase in the service expectations of the clientele, and the market is witnessing a tendency on the part of the clients to switch insurers on the basis of such criteria. However, the increasing claims awareness, the availability of agencies to assist lodging claims with insurers, and the liberal settlement awards have increased the claims expenditure of all insurance companies. It could also be possible that due to over enthusiasm to excel in customer service, the new entrants may not only resort to expeditious settlement of claims, but also be more liberal in settling the claims.
Today, on an average, 70% of the premium income is disposed towards the settlement of claims. In motor insurance, this figure may be much higher, even as high as 150 to 200%. Undoubtedly, claims constitute a major component of a company's outgo. New and small companies in the market and also companies focused on the retail segment may have `management expenses' as the second highest component of their outgo. With the dwindling investment income not enough to support any deficit that may arise in the operation, insurers look at the area of claims and management expenses to improve profit. While attempts to reduce management expenses often peter out fairly quickly, measures to reduce claims settlement costs offer a much greater chance of success. In many companies, staff cost constitutes a major component of the management expenses and any substantial reduction in the staff cost could only be achieved either by stagnating future recruitment or by pruning the existing strength. Any such step requires a thorough examination because it cannot be at the cost of business growth. Growing businesses, especially retail insurance, demand more and more staff to cater to the expansion. Here, the solution lies in having a robust IT system, which will greatly reduce the need for more staff. Yet, another important factor many companies fail to take cognizance of is the right utilization of available personnel. A "square peg in a round hole" is a common phenomenon that is noted in organizations which fail to deliver their goals despite having high quality personnel. Aligning the resources and reengineering the processes could create a better organizational value, which will ultimately improve the customer service tremendously and lay a strong foundation for sustainable returns to its shareholders.
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