Sam Ghosh, CEO, Bajaj Life Insurance Company Limited, who took over this January, outlines his aggressive growth strategy. Venkatachari Jagannathan reports

Bajaj Life Insurance Company Limited — a 74:26 joint venture between Bajaj Auto Limited and Allianz AG, Germany (formerly Allianz Bajaj Life Insurance Company Limited) — under a new team headed by Sam Ghosh, CEO, has taken the competition head-on, leaving industry watchers surprised at its rapid pace of growth.

Ghosh himself is a newcomer to the company, earlier having steered the Rs480 crore-Bajaj Allianz General Insurance Company to the second position in the Indian private sector insurance sector.

In a span of just eight months, Bajaj Allianz Life (premium income Rs220 crore) has jumped three paces to occupy the fourth slot in the 13-strong life insurance industry.

Today the company is in the midst of pursuing its twin corporate 'dream' goals — to close this fiscal with a premium income of Rs750 crore and occupy the number three slot displacing the incumbent Birla Sun Life Insurance Company Limited.

Given the daily collections — over Rs1 crore — and its month-on-month growth, the second may come true sooner.

According to the Insurance Regulatory and Development Authority (IRDA) figures, the new premium difference between Bajaj Allianz Life and Birla Sun Life at the end of August 2004 was Rs37.5 crore. Rival Birla Sun Life has taken the threat seriously.

But how did Bajaj Allianz Life achieve this growth in such a short time?

The pre- and post- Ghosh phase
Says Ghosh, "Earlier the company was inward looking and a lot of things it did didn't go right."

Those familiar with the company divide its three year history into the pre-Ghosh period upto December 2003 and after 1^st January 2004, when Ghosh took charge.

According to a former employee from the pre-Ghosh days the organisational structure was like a multi-layered pyramid with authority largely centralised. The CEO was assisted by deputy chief operating officer, chief financial officer (CFO), president (R&D), head sales and head marketing.

At the operational level the underwriting authority of the branch head was restricted and proposals had to be sent to the head office for acceptance or rejection, leading to delays and customer dissatisfaction.

Its product portfolio, too, was limited to seven and the company could not leverage its branch network and the over 20,000-strong agency force. Bajaj Allianz Life did not have a unit-linked policy that was gaining popularity and making money for life insurers. Similarly, the company was not active in the group business as well.

As the focus was on expanding the policyholder base, the company had to rest content with small policies that in turn restricted topline growth. For the fiscal 2002-03 the average premium per policy (APPP) was Rs5,470 (total fresh premium Rs63.38 crore) and for the nine-month period April-December 2003 it was around Rs7,300 (fresh premium Rs80.24 crore)

The bottom up approach
Ghosh, who also doubles up as Allianz's country manager has a clear mandate — to repeat his performance at Bajaj Allianz General Insurance with the life insurance business. He has redrawn the company's plans and rolled out new strategies.

The first step was to decentralise authority. He turned the organisational approach upside down. From top down it is now the bottom up approach. Branches that were earlier acting like post offices sending the proposals to head office for decisions now have the freedom to accept or reject proposals.

Says Saji George, head operations, "Only those proposals, which have a pre existing medical history now come to the head office. Ninety per cent of the policies are now underwritten through our software programme, Black Box. Within six days the final policy reaches the policyholder."

Branch managers were asked to prepare their own targets. In addition to chalking out an achievable target, they also have to provide what is referred internally as a 'dream target'. Overnight, branch managers became mini CEOs, which energised them to perform doubly as well.

With the introduction of unit-linked policy in January, the company was able to target high net worth individuals.

The changing organisational structure, led to members of the old management team leaving the company except for CFO Mukul Gupta.

The exodus though created some uncertainty in the minds of employees, the vacated slots were filled by poaching people like George (from Tata AIG Life Insurance Company Limited) and marketing head Sanjay Jain from Hindustan Coco Cola Beverages Pvt Limited.

Recently, Bajaj Allianz Life netted a big fish when it wooed over Ajay Singh, the southern and western region head of Birla Sun Life, to head its sales.

Along the way Bajaj Allianz Life strengthened its product portfolio and aggressively expanded its distribution network. From 60 cities Bajaj Allianz Life increased its presence to 117 cities and also opened 170 satellite offices.

Says Gupta, "The satellite office concept is based on the hub and spoke model. Two or three satellite offices will be attached to a branch. The satellite offices will act as collection centres while the branch will issue the policies."

The number of agents went up to 30,000. According to him life insurance is centred around distribution. "The more feet you have on the streets, the better for you," says Gupta.

The results started to show. Between January-March 2004, the company earned a new premium of Rs99.46 crore, with APPP going up to Rs13,192. Cumulatively, last fiscal the company earned a fresh premium of Rs179 crore selling around 1.85 lakh policies. The APPP for the whole year works out to Rs9,960.

According to an industry source it is the unit-linked policy, which has worked the magic for Bajaj Allianz Life. And in the case of a life insurance company the product mix is what decides the strategy. What's more, the sales of the Bajaj Allianz unit-linked policy has overtaken those of other companies.

The great leap forward
But the great leap forward came this fiscal, when in 122 days the company crossed the Rs100 crore fresh premium mark. According to IRDA's figures till August, the company has earned Rs143.95 crore selling 70,237 policies. The APPP climbed to Rs20,495.

Is the company in its quest for topline growth compromising on quality financials by paying the distributors more than what the product can support? Ghosh refutes this saying, "We monitor our expense and claims ratio."

Speaking about qualitative factors George says that the policy persistency / renewals and the claims experience are good. Last fiscal the total death claims for the company was Rs3.5 crore.

"The average policy period is for 15-17 years and the age profile of our policyholders is between 26-40 years." Further a majority of the policies are under annual / half yearly premium payments reducing the policy administration cost to a great extent.

Looking at the sales mix, Bajaj Allianz Life is logging impressive sales in the individual single premium segment. For the period April-August 2004, the company earned Rs50.35 crore selling 5,657 single premium policies averaging around Rs89,004 per policy. The individual non-single premium policies accounted for Rs92.59 crore.

According to industry experts such a mix is nothing to worry about provided the bulk of them are not unit-linked. Insurers who have sold more unit-linked policies are exposed to the risk of a sudden withdrawal by policyholders when the stock market goes down.

In August the company went ahead with another major initiative — its change of name. Explaining the rationale Jain says, "The name change should be looked at in the light of company's distribution network." From 60 towns earlier Bajaj Allianz Life is present in 200 towns now.

The company's survey revealed that the public, associates and others felt more comfortable with what was perceived as an Indian company if the brand name Bajaj preceded Allianz. "The two promoters, more so Allianz, readily agreed to the name change," he reiterates. The name change and the common logo will also result in economies in ad and brand spend.

Among its other initiatives, Bajaj Allianz Life has started implementing six sigma in all its offices.

Looking forward
Satisfied with the performance of the satellite offices, Bajaj Allianz Life plans to open 100 more outlets. CFO Gupta who also looks after bancassurance is happy with the three bancassurance tieups with Standard Chartered Bank, Syndicate Bank and Centurion Bank and expects them to bring in around Rs150 crore this fiscal.

"Our strategy is to have a lower number of tie ups but deep relationships. More than 30 per cent of the new business is from banking channels. The APPP from this channel is Rs35,000," he adds.

While unit-linked products contribute nearly 70 per cent of the company's business, Bajaj Allianz Life's focus is on group business. According to Ghosh, the group business is expected to contribute anything between Rs80 and Rs100 crore this fiscal.

Adds Gupta, "In the case of group business the competition is severe and the margin is very thin."

So what is the strategy? Answers Ghosh, "The one I followed while heading the general insurance outfit. First target companies with German parentage and those from the Bajaj group. Then expand our reach."

The company is also looking at non- traditional insurance distribution channels. A separate team under the head Brand Assurance has been created to identify unconventional distribution networks.

Jain says the company plans to spend around Rs15 crore on promotion. "Our communication strategy is to familiarise our brand with the public so that doors for our agents open fast," Jain adds.

Speaking of the company's investment portfolio and the yields Gupta says, "The parking avenues of unit-linked policy investments are decided by the policyholders. In the case of traditional products our aim is to match the assets with liabilities. Normally we invest in debt funds and the target yield is 6 per cent. The shareholders' funds are used to meet the solvency margin."

The one benefit of the unit-linked policies is the shifting of investment risk to the policyholders. Last year Bajaj Allianz Life had to transfer Rs40 crore from the shareholders account to policyholders account to declare bonus to its 'with profit' policyholders.

So when will the company hit the profit path? Replies Gupta, "Forecasting a breakeven point is difficult as it is mainly dependent on the product mix."

Though the company is now selling large policies, these mainly come from unit-linked ones. And the sustainability of the current bull run in that product portfolio remains uncertain.

Like other insurers it is a waiting game for Bajaj Allianz Life. Except that the company aims through uncertainties to be at the top of the industry rather than languishing at the bottom of the heap.