Bajaj Allianz Life Insurance’s complete product suite as well as its diversified channel mix have been the growth drivers, says MD & CEO Tarun Chugh. In an interview with Mithun Dasgupta, Chugh points out that introducing composite licenses would remove barriers to growth for the insurance industry, and this kind of license, if it comes into effect, would particularly be used for the new players coming into the industry. Excerpts:
What is the outlook for growth during this fiscal for Bajaj Allianz Life Insurance?
The performance of the company for the first half (H1) of this fiscal was very good. We had a 51% year-on-year growth in individual-rated new business (IRNB). We were one of the top two growing companies in the entire sector. The sector grew at around 19% during this time. It has been a good H1 for us. This was also to do with the fact that there was a base effect of Covid in that. For this fiscal, I think our new business premium will be growing much faster than the industry. Normally, we grow twice as fast as the rest of the industry. That would be maintained.
What have been the growth drivers for the company?
A lot of reasons for growth have been the complete product suite as well as the very well-diversified channel mix. We have been quite innovative in launching our new plans. We have launched a deferred annuity plan, a very strong income plan, and a guaranteed income plan with growth and income. Our unit-linked insurance plans (ULIPs) have also been very well welcomed in the industry. So, on the product side, basically, for every product need that the insurance sector now caters to we are now a step ahead.
On the distribution side, our agency has been growing well, while bancassurance has really grown into significant stature. Now, we have tie-ups with 24 banks, including Axis Bank, Bandhan Bank, RBL Bank, IDFC First Bank, and India Post Payments Bank. Currently, around 52-53% of our premiums come from the bancassurance channel, while around 40% comes from the agency channel. Five years back, around 91% of our premiums used to come from the agency channel, and around 5-7% used to come from the bancassurance channel.
Irdai has approved the proposed raising of the maximum limit of tie-ups with insurers for corporate agents from the existing three for each category of insurance to nine. What are your thoughts on it?
I think it is a welcome sign for insurance companies which are particularly not promoted by banks. Because we were always struggling to get more partners as we are not promoted by a bank. It is not that we have a readymade banker at home who is selling for us. So, it is going to benefit companies like that. It will also be going to benefit small companies. It was usually for banks to tie up with three insurers, and they would tie up with only the three best. But now at least the smaller insurers will also be coming. It is going to expand the business more. I think a lot of things that Irdai has brought in are very progressive. Things like Bima Sugam and composite licenses are going to be breaking the barriers which would normally stop growth. And, the good thing is the changes are not in one direction, the changes will happen in different directions.
Under the composite license, a general insurer would be allowed to sell life insurance products as well. If introduced, would not it create much more competition within the life insurance space?
See, a competition honestly is nothing in front of us what it can be. If I look at the US and China, there are many more companies. Composite licenses will particularly be used, I feel, for the new people coming into the industry. Now, globally there is a composite license. In India that is the barrier again. So, they would remove the barrier. Allianz globally can do both life and general insurance. But, here we have three categories of licenses. So, the barriers are being removed. A lot of new licenses may come, and a fair number of them could be composite licenses. In the existing licenses, people will have to decide what they are good at because this is a legacy thing. For example, I have no interest in getting into commercial lines. We understand human bodies, life spans, and mortality. I might want to enter a slightly healthy (segment) at the very best. Similarly, if some other companies from health want to get into a little bit of life, it is a general extension. I think the industry has to be open to this much competition.
The regulator has come up with a revised exposure draft on the expenses of management (EoM) for insurance companies. Also, for commissions, the maximum limits as specified in the current regulations are proposed to be removed… What Irdai is saying now is that as you gather scale, your expenses will come down and it will improve profitability as well. As the expenses come down, a percentage of that has to go to the customers in terms of benefits, where premiums have to reduce. Earlier, the companies could have got scale and kept higher profits. But no benefit would have come to the customers. And, that may be happening to an extent. Now, the customer benefits have to be visible. And, Irdai has very clearly said that it will check what customers benefit you are giving. On the commission, it is not that they are making it free. They are saying that boards of insurance companies have to control it. All they are saying is that all expenses are kept at the same limits as earlier, but line-wise items are removed. I think it is pretty much the way that the rest of the financial sector is structured where there is more self-governance and the board is taking more responsibility. Which board will want to increase commissions? There will be a slight change here and there.