labels: bajaj allianz life insurance, interviews, insurance
The dark horsenews
05 January 2006

Bajaj Allianz has unexpectedly moved to second place among private life insurers. CEO Sam Ghosh tells Venkatachari Jagannathan how they did it.

Sam GhoshChennai: If there is one private life insurer that has caught industry watchers by surprise, it is the Pune-based Bajaj Allianz Life Insurance Company. After a sedate existence for a few years, the company suddenly started jumping ranks and is now in the number two position among private life insurers based on new premium income.

During the current fiscal the company has underwritten new business of Rs1,100 crore, compared to the previous fiscal's Rs1,002 crore (including new business of Rs860 crore).

CEO Sam Ghosh says the company is fast expanding its footprint: "We have 103 branches and 435 satellite offices over 500 locations all over the country. We plan to increase this number to 600 by next year." On the bancassurance front, the company's focus is on increasing the productivity of the co-operative banks and the regional rural banks with which it has tied up.

Excerpts from an interview:

What is your view about the life insurance industry in general and private players in particular over the last five years?
The life insurance industry is growing at 30 per cent each year; it's one of the fastest growing industries in the country. Private players have captured a sizeable chunk of the market in these five years, with the Life Insurance Corporation of India's (LIC) share in the new business falling to 75 per cent. The upside includes improved service, riders with policies, unit linked insurance policies (ULIP), health care for as little as Rs100 per month, need-focused products with flexibility, and sales channels to suit the customer's convenience. There's a wide range of products and services competing to deliver the best value to customers, which has increased the market.

The three main reasons for opening up life insurance are supposed to be:
Funds for the development of infrastructure
Increasing insurance penetration
Increasing insurance spread in rural areas
Do you think these goals have been achieved?
Bajaj Allianz Life has offices in over 500 towns - in 367 district capitals out of the 586 districts in India. This itself indicates that we are reaching out to non-urban areas and increasing the spread of insurance in the country. We have recently launched FamilyGain, a low-premium ULIP that will help spread life insurance in non-urban areas, getting first-time customers for life insurance. Health care with a premium of Rs100 per month would again attract customers in non-urban areas who never taken insurance before.

What is the break up of policies sold - ULIP and non-ULIP or traditional?
In the financial year 2005, 75 per cent of our gross premium came from ULIP products.

Expenditure overruns and declaration of bonus are quoted as the reasons for private insurers bringing in fresh capital at regular intervals. Your view?
Expansion coupled with a rapidly growing business is the big reason for the fresh capital infusion at regular intervals. Most private insurers have stabilised their operations in the last five years and fine-tuned their business models. Now is the time for expansion and launching their services beyond metros and big cities, to get the real benefits of mass business and exponential growth.

Which segments will grow over the next three years? Do you see any that may stagnate?
Pension and health are two areas that have tremendous growth potential in the future. Almost 90 per cent of the people in the country have no old age benefits or health cover.

What new trends do you foresee in the next three years?
New products will be launched targeting niche markets. Pension products are developing in a big way, and will benefit a large section of people in the organised and unorganised sector. The annuity market has also started growing, and new players are offering a plethora of new and innovative products. Alternate channels of distribution like corporate brokers, online selling and bancassurance will increase their share in the business of all the companies.

What in your view are the issues that the government, the IRDA and the life insurance council should address?
Increasing the insurance sector FDI limit to 49 per cent should be foremost issue, to provide financial flexibility to the existing players and make the Indian market attractive for foreign investment. Also, the fringe benefit tax (FBT) should be eased, especially for group products like superannuation. FBT has caused this market to stagnate, and most companies have withdrawn this product, as companies find it increases their costs by more than 30 per cent.

How many agents do you have; what is the churn ratio?
At present, we have more than 76,000 agents. Good products focused on customer needs that are flexible and give value for money, coupled with efficient service ensures that agents would like to keep selling our products. They join us in large numbers.

also see : The high flier: Shikha Sharma, CEO, ICICI Prudential Life Insurance
Great days ahead: SV Mony, secretary general, LICI
Get ready for next phase of reforms: C S Rao, chairman, IRDA
Industry trend-setter: Nani Javeri , CEO, Birla Sun Life Insurance Company Limited
An exciting five years

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