Downside up.

Byline: Mayur Shetty

HERE'S what not to do in the insurance business - or so they say. Bajaj Allianz General Insurance's business plan has taken a view so contrarian, that success for it would mean blowing to bits some commonly-held beliefs and myths.

Conventional wisdom has it that non-life insurance companies cannot make money selling motor insurance. That's not where it stops: It's also a popular perception that a non-life insurance company would require half a dozen years or so to break even.

New insurers will also tell you that a company has to spend an obscene amount of money in recruiting the right people and building brands. Yet another old belief is that that centralising all documentation cuts costs.

Nah, says Bajaj Allianz, taking a contrarian view in all of the above. The joint venture between Bajaj Auto and German Insurer Allianz AG has been concentrating its sales in motor insurance - largely two-wheelers sold by parent Bajaj Auto. This has helped the company to sell over one lakh policies in nine months. But with an all-risk policy for a two-wheeler costing Rs 500-700, the company is not really making money.

"When we started, we went for motor insurance because we didn't have the advantage of a readymade distribution network, nor did we have promoters who could influence other corporates to buy insurance from us," says Sam Ghosh, managing director, Allianz Bajaj General Insurance.

The bulk of the company's gross premium comes from selling insurance cover to corporates. However, with a small paid-up capital the company has the capacity to retain risks where the maximum loss it would suffer on a claim is only Rs 1 crore. Most of the risk has to be reinsured to protect its balance sheet. While the commercial lines of business provides Bajaj Allianz with the initial marketshare, in the long run it's going to be retail that will help build a strong base.