In the last two decades a lot of change has taken place in the project industry with the advent of deregulation, liberalisation, private project initiatives and new forms of project financing increasing the scope for project insurance. G. Srinivasan spoke to Jibran Buchh on the growing opportunities in the project insurance sector in India.
Can you tell us about the project insurance services offered by New India Assurance Company Ltd?
We started project insurance in the 1950s and we have been a market leader for many years. We started a project insurance division in the Indian market. In fact, we also started a different wing called engineering department many decades ago.
What is happening is that a lot of projects are taking place in the field of infrastructure, be it ports, airports, manufacturing plants, power, refineries or roads. So what our company does is provide insurance when a project is in the construction phase. When the project is put up we provide cover in case of accident while the project is in process or commissioned.
What are the various types of risks attached to projects?
There are various kinds of risk attached to projects e.g. earthquake, cyclone and other forms of natural disasters or fire, which may take place due to poor workmanship or material. These are covered by wide insurance. There may be insurance for the material itself. There is a section of cover which covers loss of profit. Suppose the project runs for 18 months and there is a delay in the project due to an accident e.g. fire. The loss is overcome via a policy called advance loss of profit.
Would it be right to say that unlike project finance, project insurance does not appear to have got recognition?
Project finance is some thing which is required to start a project. On the other hand, the moneylenders would not invest unless the project is insured. The investors or moneylenders always expect the project to be fully insured. Project insurance is equally important and nobody can avail of finance without proper insurance.
That’s why we guide our customers on availing of proper insurance. There is always a long discussion while we guide our clients to opt for any form of insurance. There is proper awareness though it varies from one customer to another.
What is the share of private vis-à-vis public sector players in the Indian project insurance market? Going forward, how do you see private players performing?
Public sector really dominates the market; approximately 70 per cent of insurance is done by public sector. If have to give an example, I would speak about my company; financially we are the strongest in the market; we also have a rating given to us by an international rating organisation. This gives us a lot of advantages. If the financial capacity is more, then our ability to insure is also more. This is the one big reason that a big project can be covered without any difficulty, while a new company will not be able to do big projects and they would require reinsurance.
How different is the Indian project insurance market compared to western countries?
I wouldn’t say that there is much difference between the western world and the Indian subcontinent, because the product offered in the Indian market is at par and in line with international market. So in terms of product coverage the Indian market is as developed as any other western country.
What are your plans for the next five years?
Well, India has been going through a rough time economically, but recent reforms have brought some positives. The central and state governments are trying to develop infrastructure and therefore project insurance is has a huge space. So project insurance will play a very important role.
General insurance has huge scope to grow and today it’s growing at the rate of 20 per cent but it will grow further in next 10 years.
How do you plan to increase your market share?
We have 1,500 offices and we plan to open 200 new offices in next few months in order to increase our network. We will also be dealing through brokers who play an important role in project insurance. We will also increase our agency network in order to increase our reach. At the end of the day we are among few companies which provide project insurance through a single window.