The global insurance industry, of late, has witnessed downgrades and this is expected to reflect on the domestic market as well.

Thus, the key challenge facing insurers today is their ability to run the risk business profitably and properly, said Joe Plumeri, chairman and CEO, Willis Group Holdings Ltd, adding that downgrading questions the ability of companies to be around at the time of meeting claims.

"With expenses and claims exceeding premium income, and investment returns on the decline, it is important to operate the risk business on an operating profit basis if one has to survive," Plumeri said.

Many insurers tend to rely heavily on investment returns than concentrating on the business. A lot of this has got to do with remaining solvent, Plumeri said.

Plumeri was in Mumbai last week to visit its claims back-office processing facility at Vikroli -- Trinity -- which is Willis' third largest worldwide.

"Mumbai should grow significantly. If we can continue with this growth, we should have 2,000-3,000 employees, from the existing 800 strong force," Plumeri said.

Even as all the three global broking majors - Aon, Marsh and Willis -- have set up shop in the country, Willis alone has its processing facility for handling American and British claims.

The $1.7 billion Willis also has a joint venture in India with Bhaichand Amoluk Consultancy Services for providing insurance broking and risk management services in the country.

In India, state-owned non-life insurers run the risk of being downgraded by rating agencies in the wake of increased competition and falling interest rates.

In an effort to capture market share, both private and public companies are not pricing their product correctly.

"This is crucial since otherwise, companies can run into losses. This strategy is not sustainable in the long run, as insurance becomes a commodity and the question is who can offer the cheapest rates," Plumeri said.

As India continues to be a tariff market, Plumeri feels the role of brokers will come about when risk covers become more complicated.

"Till then we can only advise clients and insurers since in markets such as India, price is more important, though this is not sustainable," he added.

So where does Plumeri see India in Willis' world map? "It will be one of the top five markets in three to five years, but much depends upon the constraints we are facing today," he said.

Emerging markets such as India and China can expect to see growth rates in the region of over 50-100 per cent, he felt.

"In emerging economies, I do not think the attraction is 'what is' but 'what it will become'. I want to grow with the economy," he added.

Today, the five top markets for Willis include Spain (with growth rates of 20-30 per cent), the US (15-20 per cent), Italy, Australia and the United Kingdom.

This demonstrates that insurance has not taken a backseat despite the slowdown in the US and the UK, as Plumeri added: "Everybody needs what we do. It's not an issue whether to buy it or not, but rather where to buy it from."