Rituraj Bhattacharya of Bajaj Allianz Life Insurance says a typical Indian household has insurance as an investment avenue today, as it offers diversification and an opportunity to balance the investment portfolio
Rituraj Bhattacharya, head of market management & product development at Bajaj Allianz Life Insurance, has confirmed that there has been a drop in premium collections, saying that this was partly because the company had to rework products in the context of the new regulations. In an interview to Moneylife, Mr Bhattacharya discussed the slowdown in business, the response to new products that are still evolving and the competition from others in the business. Excerpts.
How is business?
It's not that great. Life insurance is in a consolidation phase. The players who are committed to the long-term, having strength and commitment, will survive. It will separate the men from the boys.
Is it the post September 2010 slowdown?
No, it is not just due to the IRDA regulatory changes, although it did have some impact. The industry did grow fast. Corrections will happen. The business dynamic changes over time.
The single premium collection for Bajaj Allianz dropped substantially in April-June 2011 as compared to the corresponding period last year, even though other insurers excelled in this time.
We have been strong in regular premium sales. Post regulatory changes there had been a gap in the product portfolio with the filing and approval and training of agents for a new set of products. We have a healthy mix of single and regular premium, traditional and ULIP products.
Has there been any downsizing on account of this slowdown?
There has been some consolidation of offices that were close to each other. They were brought under one roof, even though technically they operate as independent offices. We want to ensure customer service and distribution does not get affected.
Which insurance products appeal to different segments of the Indian population?
A Nielsen study some time back pointed out that the buying behaviour of a typical Indian household has insurance as an investment avenue, ranking third or fourth in the list of top investment options. Traditional products do well in eastern India, while ULIPs have made a mark in western India. Even high net-worth individuals (HNIs) have strong traditional plans in the portfolio.
Insurance offers you diversification with a mix of ULIP, traditional, pension and a mix of single and regular premium products. It is about balancing your portfolio with investment in different asset classes to achieve protection, long-term hedging, and returns. Small-ticket ULIPs are also in demand; we have a Money Secure ULIP for this segment.
What has attracted customers towards ULIPs?
People, especially in tier-2 and tier-3 cities, were looking for avenues of investment and diversification along with investment risk exposure, whether it is in equity, debt, or liquid funds, in varying proportions. They enjoyed what ULIP had to offer; the need was there. Mutual funds have limited reach. We have 1,100 offices in India. Life insurers have better customer reach than mutual funds.
How do you compete with the Life Insurance Corporation of India (LIC)?
In many cases, existing LIC customers have purchased policies from us expecting better service. Our agents are well-versed with our products and sell through a consultative approach, after trying to understand the customer's needs, expectation of returns, length of commitment, risk profile, and so on.
Which are some of your innovative products?
We launched 'CashRich' (traditional product) last year. It is not a true pension product, but it does appeal to customers with a long-term guarantee of 5% of the sum assured every year in the cash-back period. While 5% of the sum assured may not make much sense in the long-term scenario of falling interest rates in growing economies, we are offering value to customers. The premium payment term can be five to 30 years, while the cash-back period can be five to 35 years. There will be assured cash flow as well as non-guaranteed bonus in the post-retirement years to take care of overheads. In regular pension products, the annuities rate in the payout phase is determined only at the time of purchase (after premium payment term). Moreover, it is taxable too.
We did a study on retirement issues. When a person retires, the product is of 'plenty'. The person gets gratuity, provident fund, many insurance policies mature. The person looks for avenues to put money. As such, there is no change in the way people live their lives. Other than the salary cheque not coming, the issues are the same, whether it is replacing the TV, repainting the house, family occasions, health issues and so on. Five years down the line, there is a problem of scarcity. The person starts cutting down and living within limits. Many times people die rich with a home worth crores. But liquidity is meagre. A personal loan is not possible and putting the house against small loan is not worth it. So a loan can be taken against an insurance policy.
Are there any new product ideas in the works?
We are exploring the joint life concept. Husband and wife have insurance policies. If both operate on one policy, the cost could be reduced, there could be lesser hassles and economies. We are evaluating if it will benefit customers and fulfil their needs.
Bancassurance is allowed to be opened for two life and two general insurers per bank. What are your comments?
Our business comes through the agency channel, corporate agency, bancassurance, alternate channels, online purchase, and so on. We are able to tap different segments of customers. A larger pool with higher diversity is better for business. Bancassurance is an important channel and it will open avenues with two insurers tied to a bank.
How has the response been to the online ULIP iGain III?
It has been fairly good. The product will catch up as the online market matures and people are comfortable buying online ULIPs.
Income from operation has increased by 22.99% to Rs438.41crore for the June 2011 quarter
ARSS Infrastructure said that its net profit for the quarter ended 30 June 2011 has increased 13.5% to Rs38.65 crore compared to Rs34.05 crore in the corresponding quarter of the previous year.
Income from operation has increased by 22.99% to Rs438.41crore for the June 2011 quarter from Rs356.48 crore for the quarter ended June 2010.
In the late afternoon, ARSS was trading at around Rs385.50 per share on the Bombay Stock Exchange, 0.13% up from the previous close.
India is adding 2.25 lakh new demat accounts per month
Number of demat account holders in the country is likely to touch 25 million by 2015 from about 10 million now on growing tendency among young and middle aged persons to invest in capital market, SMC Global Securities said on 7th August.
"...(they are investing) not only to multiply their wealth faster and quicker but it also help them stand and insure shocks of possible employment loss," CMD of SMC Global Securities Ltd Subhash C Aggarwal said.
India is adding 2.25 lakh new demat accounts per month, the company said.
The financial solution provider firm said that "a new enthusiasm among young and middle aged persons, including employees, to take part in equity and mutual fund transactions to park their savings" could be seen.
According to a research of SMC Global Securities Ltd, a new equity culture is beginning to evolve in India, in which the contributions of young employees need to be recognised "in the sense that their risk appetite is increasing".
Demat refers to a dematerialised account for individual to trade in listed stocks or debentures. As per market regulator Sebi, demat account is must for such trade.