Insurance cos shift focus from market-linked products

Market-linked products have been driving the growth of private insurers for some time now. But, the market volatility has forced the companies to re-think their strategies, reports Subrata Panda.

Illustration: Uttam Ghosh/Rediff.com

Bajaj Allianz Life Insurance is focusing more on providing living benefits to its customers than protection to their families after death.

Chief Executive Officer Tarun Chugh said, "We have changed our strategy and moved to life goals."

To industry observers this might seem to be against the sector trend, where many insurance companies have shifted focus from market-linked products to pure-protection products.

Chugh, however, said, "The median age in India is 25. Those who are in their 20s are not looking for life cover."

Market-linked products have been driving the growth of private insurers for some time now.

But, the market volatility has forced the companies to re-think their strategies.

While Bajaj Allianz Life continues to grow at twice the pace at which the insurance industry is growing, this year they had to tone down their growth projections.

"ULIPs have come down in terms of growth. Even mutual funds (MFs) have been hit, and so have the ULIPs," Chugh said.

"So, initially our growth rate for the year was higher. But, because the entire base is not expected to grow as much, we have toned our growth expectations."

With a capital of around Rs 9,500 crore, the company has no plans of listing itself on the bourses.

Till date, three life insurance companies have listed themselves on the exchanges.

Like many other insurers, Bajaj Allianz Life also has exposure to the beleaguered IL&FS group.

The life insurer has already made provisions for 75 per cent of the exposure they have to IL&FS, and that too, in one quarter.

On investments, he says, "We are very careful about investing, and the Insurance Regulatory and Development Authority (Irdai) has very strict norms.

More than 50 per cent of our investments go to government securities."

Not very long ago, the company was heavily depended on the agency channel for the sale of its products.

But, that changed over time.

Now, other channels of distribution contribute 30-40 per cent to their sales.

Bancassurance model -- where an insurance company ties up with banks to sell their products to the banks customers -- contributes 15-18 per cent to their sales.

It has tied up with Dena Bank and Bandhan Bank to further capitalise to sell their products.

On steps being taken to increase their market share in the life insurance space, Chug said, "First thing, is to get the strategy right.

"So, we are focusing on living benefits.

"Then, we are clearly looking at product innovation as a means to reach out to the customer so they are more interested.

"It will put more value on the table."

He added, "Innovative ways of marketing is one of the ways. Plus, there should be more distribution channels."