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| 'Six-month or one-year aberrations shouldn't make customers nervous' | | Q&A: Nitin Chopra, MD & CEO, Bharti AXA Life Insurance |
| Shilpy Sinha / Mumbai Apr 17, 2009, 00:45 IST |
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 At a time when large insurers have failed to become productive even in their eighth year of operations, Bharti AXA Life Insurance is hoping to turn profitable in another three years. Nitin Chopra, the company’s managing director and chief executive officer, tells Shilpy Sinha that cost-effective operations will help it achieve profits. Excerpts:
Bharti has parted ways with its joint venture partner AXA in mutual fund. Does that have any impact on the insurance joint venture?
Bharti has clarified that they would like to retain the insurance business, while calling off the mutual fund joint venture. Moreover, Bharti has a minority stake in the asset management company.
Why are global partners exiting from the mutual fund business and staying with the insurance joint venture?
Generically, these frameworks allow flexibility of movement.
What is your plan for the current financial year? How will the industry grow in 2009-10?
We plan to double our market share. We now have an expanded distribution – 200 branches as against 78 last year. We are creating a very robust agency force. On an average, our agents have 30 per cent higher productivity than the market average. We will also enter the health sector this year.
Some of our tie-ups with Airtel are coming alive. Around 14-15 per cent of the business has come from our partnership with Airtel and this will only grow. We have now found the right way of partnering with Airtel.
Our own prediction is that the market will remain side-based even in 2009-10. There is nothing wrong with the equity market, but there is a nervousness. The industry growth would be range-bound. If it has declined by 7 per cent, there would be a recovery this year.
Do you think there will be enough appetite for guaranteed return products once the market rebounds?
Insurance is a long-term product. So a six-month or a one-year aberration should not make any customer nervous. It’s like the distribution curve of people – there are both risk-takers and risk-averse people. In economic upturns, some risk-averse people become risk-takers and, in a downturn, some risk-embracers become a little more risk-averse.
Given the fact that there is nervousness, we have evolved a very interesting guaranteed product. It is not a run-of-the-mill product. It’s far more robust. We are also looking at a number of new products. We are looking at universal life products (ULPs). Talks are currently on with the regulator to allow ULPs, which allow premium flexibility. We are evolving a micro-insurance product on a ULP platform.
It is important to have these kinds of products in the suite. We will allow a one-way switch from a guaranteed plan to unit-linked products (Ulips), but not vice-versa.
How will the standardisation of Ulips help the insurance industry?
The idea is not to constrain the product in any manner, but the usage of standard terminology will help the customer and the policyholder to understand it better – right across different products.
It makes product comparison relatively easier. It has more to do with standardising the way different charges are structured in a policyholder’s account. It is an effort towards generic standardisation that any country will go through as the industry matures. The industry is reflecting some maturity.
What is your take on consolidation in the insurance industry?
Shareholders should have the ability to exit in the best possible manner. A framework of this kind can help shareholders take different views at different lifecycles of their own businesses.
We have a suite of life insurers in the country and if there is a choice that is given to the market players, some shareholder may want to exit. Whether it is imminent is not known but, two years from now, perhaps the situation could be different and people may want to exit. India is a very interesting market. So no one wants to exit. Bharti will look at consolidation to compliment the revenue or cost line and other strategic benefits. Both the partners are well capitalised.
The intent of the regulator would be to create a framework, which essentially has to do with the protection of policyholders and not only the shareholders. It protects different interests.
When do you expect to break-even?
We will break-even by 2012-13. AXA is a long-term player globally. We are not in the short-term game of getting in the lead tables, which is not very robust.
Do you think the regulator should now allow an open architecture?
We have asked the regulator that, if open architecture is possible in mutual funds, than why not in insurance? There is a view in terms of the market’s maturity and we respect that as well. In many countries were AXA operates, there is open architecture. In Korea, banks are forced to have an open architecture and one bank cannot give more than 25 per cent of the insurance business to one insurer. A single insurer is, at times, not able to offer a whole slew of products.
We are trying hard at this stage to find a bank as a partner. That will help us to grow better than what we have projected. When we entered the market, all banks were signed up. The going is tough and we lack this distribution channel.
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