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Telco to offer Insurance?

Posted by tggokul on August 11, 2007

The things Telcos do these days to retain their subscriber base!!! BSNL, one of the leading Telco in India is offering a non-life insurance cover to all its 40 million landline subscribers for an extra 1 Re a month.

BSNL has been losing subscribers at an alarming rate ( mainly to Bharti Airtel) and this scheme they hope will stop the outflux. I assume BSNL will bear the rest of the premium. The second stage involves them extending this offer to its mobile subscribers.

Let me do some Math here. In general for an insurance cover of Rs.50000 a year ( 1200$), you would need to pay a premium of Rs.200 ( $5) a year. Now Rs.1 a month translates to Rs.12 a year, the rest Rs.188 has to be shelled out by BSNL per year per customer. This makes no business sense to me. Yes, I appreciate the noble cause where everybody including the poor in rural India get a chance to be covered. But how does BSNL plan to make profit?

Having said that, Insurance premium is a volume game ( more people you have, lesser the premium) and if anybody can play the volume game, it is the Telcos in India. With nearly 70 million subscribers ( landline + mobile), I am sure they can twist the insurance partner ( in this case State Bank of India, though BSNL retains the right to have multiple partners if need be) to reduce the premium rates.

Let me throw out an interesting thought. If this is the precursor of things to come, would Telcos enter retail as well? Bharti-Airtel ( taking a leaf out of Walmart’s book) is almost there with it ELP ( Everyday Low prices) scheme. Reliance has a very strong retail/telecom business. So what if they come and tell me ( Bharti is my landline/Broadband/mobile service provider) that I get better deals in their retail stores because I am a subscriber. Now THAT would make me stick to them for ever!!!

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