Brand matters most in insurance business growth
At the helm of Bajaj Allianz is Kamesh Goyal, regional CEO for Allianz Middle-East, North Africa and South Asia Region and CEO Bajaj Allianz Life Insurance.
By Mayur Shetty, TNN |
| Kamesh Goyal CEO Bajaj Allianz Life Insurance |
Bajaj Allianz Life Insurance is the second largest private life insurer in India. At the helm of Bajaj Allianz is Kamesh Goyal, regional CEO for Allianz Middle-East, North Africa and South Asia Region and CEO Bajaj Allianz Life Insurance. In an interface with ET, Mr Goyal speaks of his strategy for this high growth market.
How has ���07-08 been in terms of business? How has the IRDA ban on complex unit-linked insurance plans and the crash in stock markets affected your sales?
We have witnessed good growth for the first six months of the year. Somewhere around August 2006, our Capital Unit Gain insurance plan was withdrawn in keeping with the new regulations. This led to an expected slowing down of growth in October and November.
But interestingly, we managed to bounce back in December and January to regain the growth rates that we had seen in the first half. However, growth slowed down in February and March again. This was more due to the stock market volatility, which affected all companies. For instance, in February ���08, we managed to increase our marketshare despite growing slower.
Overall, the growth in annualised premium for this year is expected to be in the region of 75-78%, which is good considering the slowdown in the last quarter. Our results are under audit and the exact picture will be available next month.
One important aspect is that since Allianz owns only 26% of Bajaj Allianz, our business does not get consolidated with Allianz���s. Last year, Allianz had around euro 100 billion of revenues. India���s contribution is likely to be around 2.5-3% of the total revenue in 2008.
Bajaj Allianz Life and non-life generated revenues of Rs 12,000 crore in ���07-08 and employs around 30,000 people. Given our growth rate it will be getting more and more significant for Allianz. Our region South Asia, Middle East and North Africa is a new region and India contributes to around 84% of the region���s revenues.
Other companies are now following Bajaj Allianz��� strategy of building up scale through a huge distribution network and selling investment linked plans. How do you retain your edge?
I think the cutting edge would be the brand; how reliable is the brand from the customer���s perspective? How productive is your distribution force? Productivity is important because expenses are becoming a huge differentiator and thirdly, how are your the service levels? Merely having offices does not give an edge to anyone.
How has ���07-08 been in terms of business? How has the IRDA ban on complex unit-linked insurance plans and the crash in stock markets affected your sales?
We have witnessed good growth for the first six months of the year. Somewhere around August 2006, our Capital Unit Gain insurance plan was withdrawn in keeping with the new regulations. This led to an expected slowing down of growth in October and November.
But interestingly, we managed to bounce back in December and January to regain the growth rates that we had seen in the first half. However, growth slowed down in February and March again. This was more due to the stock market volatility, which affected all companies. For instance, in February ���08, we managed to increase our marketshare despite growing slower.
Overall, the growth in annualised premium for this year is expected to be in the region of 75-78%, which is good considering the slowdown in the last quarter. Our results are under audit and the exact picture will be available next month.
ADVERTISEMENT
What is the relevance of Bajaj Allianz to Allianz���s global business?One important aspect is that since Allianz owns only 26% of Bajaj Allianz, our business does not get consolidated with Allianz���s. Last year, Allianz had around euro 100 billion of revenues. India���s contribution is likely to be around 2.5-3% of the total revenue in 2008.
Bajaj Allianz Life and non-life generated revenues of Rs 12,000 crore in ���07-08 and employs around 30,000 people. Given our growth rate it will be getting more and more significant for Allianz. Our region South Asia, Middle East and North Africa is a new region and India contributes to around 84% of the region���s revenues.
Other companies are now following Bajaj Allianz��� strategy of building up scale through a huge distribution network and selling investment linked plans. How do you retain your edge?
ADVERTISEMENT
If you really look at financial services over a period of time, number of branches and number of people cannot be a competitive edge for more than six months to one year. These can easily be replicated, particularly in the insurance business, where there are no restrictions on opening new offices. I think the cutting edge would be the brand; how reliable is the brand from the customer���s perspective? How productive is your distribution force? Productivity is important because expenses are becoming a huge differentiator and thirdly, how are your the service levels? Merely having offices does not give an edge to anyone.
ADVERTISEMENT
In the banking sector, we have seen private banks with five to six hundred branches doing much better than public sector banks with over 2,000 branches. I think the focus has to be on increasing productivity, improving the brand and services. In the last six months, we have not focused on opening offices, the focus has been on beefing up our IT infrastructure. This year too, the focus will be on infrastructure rather than opening of too many new offices.Life industry growth appears to have moderated this year. What kind of long-term growth do you foresee?
I feel that the industry, including the Life Insurance Corporation (LIC), would find it difficult to grow beyond 20-25% for the next 5-10 years. The growth rate of LIC will be a huge determining factor for the industry growth rate. From the kind of growth we have had, 20-25% might seem small but I personally feel that this is a good level. The private sector should grow at 50-70% for some time.
How much capital will your life insurance business require?
Our capital is around Rs 1,400 crore. This year, we should be looking at infusing other Rs 600-700 crore of capital. This means that our paid-up capital should be going beyond Rs 2,000 crore. Until the time revenue from renewal premium kicks in big time ��� that is until renewal premium becomes around 50% of gross written premium ��� capital infusion would be required.
My feeling is that somewhere around 2010-11, we could look at renewal premiums accounting for 50% of premium. But from our side, the focus is to see that we keep growing our new business faster and we do not really want to slow down to reduce the capital requirement.
ADVERTISEMENT
Over half a dozen new companies are waiting in the wings and there is a likelihood that there will be poaching. How will you retain people?Whenever you have new entrants coming in and existing ones are expanding really fast, salary levels and incentives do not work beyond a point. This is because new players will offer more than what you are paying. In India today, any company should be prepared to keep attrition as one of the factors to deal with.
One can reduce attrition to some extent through salaries, but salaries alone cannot help retain people. We need to look at other issues such as empowerment. Other issues include: Do people feel happy to work in this environment? Do they feel that they can grow much faster in their career in this company?
We ensure that we keep a team of people in the company ready to take up higher responsibilities in a short while. Our approach is to do both and simultaneously improve our systems and process, so that customers do not suffer because of attrition and they feel that the service levels remain the same for them.
ADVERTISEMENT
Besides insurance, what are Allianz���s plans for India?Dresdner Bank, which is a 100% subsidiary of Allianz, has received an in-principle approval for opening a branch in India. That should begin operations in the next few months. Allianz has also been exploring the asset management business in India since it is among the top three asset managers across the world.
ADVERTISEMENT
We hope that in the next three to six months, some decision will be taken on the asset management business. The insurance companies are doing well and the objective is to be present across all financial services. Bajaj Allianz is the lead sponsor of the Rajasthan Royals, the IPL T20 Team from Jaipur. What made you get into this sponsorship?
Allianz first got associated with cricket when it sponsored the India-Pakistan series about two years back. The feedback we got for that was quite good. Though April to June are really lean months for the insurance business, we have been noticing that the insurance advertisements clutter the space during the second half.
We therefore thought that maybe by spending some money, though that is expensive for the first quarter, we could establish ourselves as a brand.
Given the buzz that IPL has created, we feel that it will be good value for money in terms of establishing our brand name.
This is the first time Bajaj Allianz has directly associated with a cricket event. Depending on how the concept is received, we should be deciding whether we should get involved more in cricket or not.
Download
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
The Economic Times Business News App for the Latest News in Business, Sensex, Stock Market Updates & More.
ADVERTISEMENT
