Sep Insurance Hdfc

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HDFC Chubb General Insurance

Product Development

HDFC Chubb General Insurance Company Ltd.

Acknowledgements I am grateful to the following for their valuable assistance: Michael Kuhn - Swiss Re John A Reiner - Chubb Corporation, USA I have drawn liberally from : Publications of Insurance Advisory Board, USA

2

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Product Development in non-life insurance Balancing expectations What really happens Drivers Principles Challenges Process The way forward Prospects

3

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Balancing Expectations The insurer’s dilemma

Widest coverage for lowest cost

Measurable exposure and economic premium Insurer

Buyer

The peculiarity of insurance is that making a sale does not amount to making a profit -insurers’ problems sometime begin when the sale is made 4

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

What really happens Deregulation of insurance markets invariably leads to demands for enlargement of products This can come in the form of Completely new products  contingency insurances  travel insurance  Accident & Health Multi line covers  combining lines of business in one cover  removing well established and necessary insurance principles or exclusions from established covers Movement into areas of other business  e.g banking - such innovations sometimes lead to costly lessons

5

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Drivers Customer - primary driver Intermediary - channel of communication, defines practical parameters in terms of pricing and costs Regulator - act as a balancing force Competitive businesses - e.g. banking, other providers, financial or finite risk ‘insurers’ Insurers - Expertise Reinsures -Capacity, handholding during the learning curve Capital Markets - provide reality check

6

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Principles The opportunities provided by opening of an insurance market present an equal amount of risk, hence it is necessary to stick to sound insurance principles and develop mutual cooperation between the parties The most important principles: Need Necessity Randomness Other determinants: Mutuality Economic efficiency Assessablity Identical/Similar exposures

A critical determinant is availability of data, drilled down to the greatest possible detail, to facilitate statistical analysis. Here, the regulator and insurance associations play the most important role 7

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Challenges Building a customer base Threat of insurer marginalisation Retaining customer loyalty Is there such a thing as lifetime customer? Making profits Retaining shareholder commitment Building up substantial reserves

8

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Process And this has to be done within the existing process

Risk Financing

Underwriting/ Rating

Product Design

Product Assembly

Distribution

Insurers’ Traditional Competencies

9

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Constraints Constraints of incumbent channels and products product development is strongly influenced by existing distribution what competitors are doing or have done existing stable of products Constraints posed by regulatory apparatus regulators have a natural inertia to approving ‘new to the world’ products Inadequate sensing mechanisms to detect changing customer needs no formalised sensing mechanism….mostly reliance on intermediaries Inflexible product assembly organisation structure business processes

10

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

The way forward Insurer defined product compromise

Stimulate principled product design

Segment driven product design Masterpiece

Opportunity oriented product development cybersecurity for commercial insureds

How to move form one end to the other

Meet changing needs

Core customer intelligence through employees distributors focused research annual surveys

Proactive protection upgrades

11

Customer driven risk-management solutions

Assemble flexible product solutions

Menu aided package building Individual PA

Objective based products Personal K&R

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

HDFC Chubb General Insurance Company Ltd.

Prospects Introduction of global templates with minor modifications travel accident and health IT industry Financial Services industry Flexible pricing tariff removal or relaxation Evolution of intermediaries brokers Building database to facilitate statistical analysis

12

Copyright © 2002 HDFC Chubb General Insurance Company Limited — Confidential — IND

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