New Delhi: Rajesh Sud was promoted last month as chief executive and managing director of Max New York Life Insurance Co. Ltd, a joint venture between Max India Ltd and New York Life Insurance Co. In an interview, Sud, who was earlier deputy managing director, spoke about his plans to widen the company’s reach in the next three years. Edited excerpts:
What is the key challenge before the company today?
I have been part of the company since (its) inception. We have in place a very strong growth strategy, which entails rapidly multiplying our business objectives—whether it is opening new offices to (increase the number to) 1,600 from the current 475 to improving premium income four-five times by 2011. This will entail hiring almost 300,000 agents and over 25,000 employees, and commitment of capital in excess of Rs3,600 crore. The biggest challenge for us will be to execute this plan.
How much do you expect to grow this fiscal?
We are growing currently at about 65% over last year. This compares very favourably with the private life (insurance) industry which otherwise has seen about 40-42% growth rate this year.
Rapid expansion: Sud says the challenge will be to be able to execute their plan of hiring 300,000 agents and setting up 1,125 new offices by 2011. Ramesh Pathania / Mint
So, we are significantly ahead of the market as far as the private players are concerned. The overall life insurance industry has seen a little bit of a dip on account of LIC (Life Insurance Corp. of India). We intend to maintain this margin of growth and continue to lead the private market growth rates.
What’s your investing strategy in a declining market?
Most of the funds that we invest are on behalf of the client. So, when customers choose a plan they give us the proportion of the allocation (in) the way they want to spread their investment risks. Depending on customers’ choice...we go with what their recommendations are.
Currently, given the overall liquidity, we are not experiencing any redemption pressures. There is no spike seen in the past six months… In general, because we look at the timing and to some extent opportunities that come from time to time, we would hold about 15-20% of the money in cash, currently.
What new lines of business are you looking at?
Within the life insurance space itself there is a tremendous opportunity. This is clearly an underpenetrated market despite all that happened in the past eight years with private growth. Still, we are currently at 4% of the GDP (gross domestic product) which is contributed to by life insurers.
When we are compared with most of the countries, there is significant growth potential—almost to the point of doubling it from where it is right now.
So, first and foremost our focus is life insurance. Adjacent to life insurance there are two other needs which again are in the current evolution that India is going through, both economically as well as socially. One pertains to retirement. We are very actively looking at that space and we already have products in that space.
Second, a similar evolution that is going to happen is the need for health care...
Do you plan to rebalance your portfolio with more emphasis on traditional plans?
We have always been differentiated in the industry as having a belief that you must have a balanced range of products. What we are most interested in making sure is that we sell to the needs of a client.
Our approach to product design and the whole portfolio that we have is to come from customer backwards. Currently, we have 35 products that offered every opportunity to sell to a need. We still have about 15-16% of our sales in non-unit-linked products which to my mind is healthy compared with what I find most of the competitors talk about...and they talk about in excess of 90% of their sales, and 5-6% is a material difference in this current market.
How are you ensuring that Max New York Life lives up to its slogan of ‘zyaada ka irada’ (aim for more) in these times?
I think zyaada ka irada is really a thought that represents the attitude of the company and maybe the attitude of the resurgent India that we all live in now. This embodies the whole... It is not about investing returns only but about everything we do. It’s about making choices—that you have more choices, that you have excellent service back-up from our side, that our products are internationally superior and they work to your benefit. On returns, we have had a very good track record. When we compare with our own benchmarks, our investments have clearly been in top quartile. But that’s not our focus. That’s something we do well. If we wanted to be only in the investment business we would have been a mutual fund company and not a life insurance company.
What are some of the major challenges for life insurers, currently?
Challenges are more indirect at this point of time...as the overall economy does face a little bit of a slowdown. But it will still be a high-growth economy. Too much is made out of what the current situation is... I remain cautiously optimistic of what the future is going to be.
Second, as things develop, as maybe stock markets go through this little bit of correction they have to, there will be direct impact on those kinds of companies and the industry as a whole that may be focusing on investment side of it.
Those who might have extended themselves little too fast and in too many other things that they were trying to do simultaneously might have to pull back. But our strategy has been to be steady, to do things step by step, and we continue to build on this.
Do you plan to bring down premium rates of term insurance after reduction in solvency ratio by the regulator?
We have reviewed our current rates and what the regulator has done. First of all, we find that the proportion of term sales as far as we are concerned is rather low. It’s a marginal product at this point of time for us.
Second, the reduction of solvency ratio surely helps but in the overall context of things, it is not as material for us to revise our premium downwards.