Home insurance gets least priority

With the growing number of homes in the middle-income and high-end segments, the home insurance segment is gradually gaining awareness across the country.

But traditionally, buyers' interest in choosing the best of homes with elegant interiors, isn't matched by the interest in securing there purchase.

“The home insurance sector is at a nascent stage, as compared with other insurance sectors in the country,” says Mr Mukesh Kumar, Head - Strategy, HDFC ERGO. According to him, housing finance companies are playing an important role in evolving the home insurance companies in India.

“Increasing incidents of house burglary, better awareness, and higher disposable income are contributing to the growth of the home insurance segment,” says Mr Subrahmanyam B, Senior Vice-President and Head - Health, Commercial Lines and Reinsurance, Bharti AXA General Insurance.

UNTAPPED POTENTIAL

However, home insurance contributes to only around 1 per cent of the total business written by general insurance companies today, which shows the huge untapped potential of this segment, adds Mr T. A. Ramalingam, Chief Technical Officer, Bajaj Allianz General Insurance.

Home insurance is given little priority. While customers choose the best appliance, or décor for their home, when it comes to securing it, there is a perceptible indifference, he adds.

He explains that housing loans have led to growth in home insurance purely at the banks' insistence, and most customers leave the insurance decision to them. On a standalone basis, home insurance has few takers, says Mr Ramalingam.

Ms Roopa Shankar, a partner in a Bangalore-based wealth management firm, has a similar view. She gets several enquiries from customers on home insurance but the lengthy process of listing out of household items and valuing them puts them off. “They never return with filled-up forms,” she adds. This is despite the fact that premiums for home insurance are fairly low, points out Ms Shankar.

It is no surprise that home insurance doesn't contribute much to the overall business of general insurance companies.

But what is heartening to know is that these companies are seeing a growth in this segment. For Bharti AXA, the segment has shown 100 per cent growth in 2011, while for ICICI Lombard and Bajaj Allianz GI, growth is at 25 per cent and 20 per cent respectively.

Much of this growth comes from metro cities. “Currently, home insurance is doing well in metros and Class-A cities. The segment is gradually growing in the Class-B and C cities,” says Mr Neelesh Garg, Executive Director, ICICI Lombard GIC.

NATURAL CALAMITIES

He explains that the increase in the rate of occurrence of natural calamities, such as flood, earthquake and tsunami, has resulted in a growing need to protect homes.

So, home insurance is picking up in areas prone to natural calamities and among the high net worth individuals segment where there is potential for greater loss, he says.

Mr Kumar of HDFC ERGO adds that finance companies making home insurance mandatory for home loans has contributed to a 25 per cent growth in home insurance in the last financial year when home insurance premium touched Rs 150 crore. The latest growth curve shows the home insurance premium touching the Rs 150-crore mark, registering a growth of 25 per cent in the last financial year; and if the situation prevails, this pattern is expected to continue,” he says.

Besides growing awareness, according to Mr Subrahmanyam of Bharti AXA GI, increased demand for individual mediclaim policies has stimulated growth for this segment also. “There is an increase in the number of intermediaries focusing specifically on this segment, as commissions are fairly attractive,” he says.

Bharti AXA plans to target intermediaries catering to this segment exclusively, and also develop a dedicated sales force. “We also plan to cross-sell home insurance products to our existing motor and health insurance customers,” says Mr Subrahmanyam.

For ICICI Lombard, the focus would be on multi-channel distribution, including online transactions. “We will use the online medium extensively for selling a home insurance policy. Along with the ease of buying a policy in no time, online buying also gives a transparent view to the customer on policy coverage, exclusion, premium and the claims process,” points out Mr Garg.

Mr Ramalingam emphasises the need for simple and easy-to-understand variants. For instance, Bajaj Allianz's ‘Easy House Holders' policy covers home and assets from fire and related dangers, burglary and theft, breakdown of domestic appliances, electronic equipments and baggage. The plan is available as a kit, and offers three choices depending on the sum assured. We feel home insurance would do well due to the convenience and simplicity aspect.