BackMoney Guru | Products with easy underwriting help drive sales
Money Guru | Products with easy underwriting help drive sales
PremiumSandeep Ghosh, CEO, Bharti AXA Life Insurance Co Ltd
The Competition Commission of India has cleared Reliance Industries Ltd’s acquisition of Bharti Group’s stake in Bharti AXA Life Insurance Co. Ltd and Bharti AXA General Insurance Co. Ltd. Now the buyout awaits regulatory and shareholders’ approval. Does this change the lives of your policyholders, staff and agents?
From the moment the news became public, we took all the stakeholders and affected parties into confidence. Even as a strong company like Bharti is exiting, a very strong company like Reliance Industries is entering and that means well and we have AXA’s continued commitment. AXA is now the largest insurance group in the world and in that sense there is a serious commitment to deliver. We have personally met the staff and agents of the company and communicated to all our existing policyholders and they will be kept in the loop as things develop. Nothing has changed and our policyholders will not face any kind of disruption.
You launched the campaign of settling claims within 48 hours about a year back. But according to Insurance Regulatory and Development Authority’s annual report, 2009-10, your claims repudiation was around 22%. You are among the top 10 in terms of claims repudiation ratio.
Two things here. We launched in 2007 and in that sense we are a relatively young company. For any new company, the early claims (an early claim is a death claim received within two years of the policy) proportion is very high and such claims require to be investigated. Therefore, there will be a higher repudiation experience in early claims and the ratio is usually skewed in the initial years. As the company matures, the “non-early" claims as a part of the overall claims portfolio increases resulting in a better claims record. Our claims repudiation ratio in 2010-11 was around 12.58%.
Coming back to acquisitions, the life insurance industry today is seeing many cases of possible acquisitions. Is it because of the fact that insurance is a capital intensive business and the promoters are feeling the heat now? Till now, at least six insurance companies have broken even, out of the total 24.
Let me address the question in two parts. The first is profitability. The companies that have broken even are those that have been around for about 10 years. This means they have a large renewal book. Also, before last year’s regulation, there was no cap on surrender charges. So older companies have that vintage advantage; relatively, younger companies don’t have that advantage.
Coming to the second point, acquisitions are not new but are increasing because profitability in insurance is a long-term goal and is taking longer than what some of the shareholders had expected. Also, regulatory reforms have accentuated the profitability challenge for the industry.
Post regulatory changes, many insurers are selling policies with relaxed underwriting or over-the-counter products (having simple underwriting). Why is that?
Products that have relaxed underwriting usually get sold easily and insurers come up with these to drive sales. However, one needs to maintain a balance. We don’t sell low-ticket or over-the-counter products aggressively. In fact, only about 1% of the sales comes from these products.
Having these products also depends on the distribution channel. We don’t have a strong bancassurance channel. These products are best sold through banks since they have tied customers. We will look at products with relaxed underwriting after we are able to build our bancassurance business.
The sale of traditional plans has also increased. What’s your experience?
Same for us. We had high dependency on unit-linked insurance plans or Ulips till last year (before the new regulations on Ulips were announced). Today we have a 60:40 mix—60% of our policies that are sold are traditional plans and 40% Ulips. We wish to maintain this balance.
Sandeep Ghosh, CEO, Bharti AXA Life Insurance Co Ltd
deepti.bh@livemint.com
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