Profitability is still some time away: K S Gopalakrishnan

Interview with MD & CEO, Aegon Religare Life Insurance

Private life insurer Aegon Religare Life Insurance plans to continue focusing on the online terms space. Managing Director and Chief Executive Officer K S Gopalakrishnan, in an interview with M Saraswathy, talks about the company’s strategy. Edited excerpts:

Your company is one of the largest players in the online insurance segment. Will the thrust on this channel continue?

For us, the online channel is strategically important. We started it with term insurance, evolved the product, and included new covers such as terminal illness benefit covers.

Later, we also came up with online Ulips (unit-linked insurance plans), health products and fixed benefit products. At the end of December, we introduced savings-cum-insurance products. We also brought out a few riders for the term products. Of the total business, about a third is accounted for by online, a third by the proprietary channel (agency and salaried sales-force) and the rest by the corporate agency and brokers. This is line with our business plan.

Are all your new products in line with the new product guidelines being implemented?

Some of our products were approved on September 30; for some that weren’t, approvals have now been received. There was a popular product (a without-profit endowment product) in the agency channel; for that, the migration happened in November; we didn’t wait for January. Any change will have a negative impact. It went on for four weeks and since the last week of December, it had started settling. Now, we can clearly say the impact of product changes is behind us.

For the quarter ended September 2013, Aegon Religare’s net losses fell about a half. Is profitability on the anvil?

As volumes rise, losses fall. We have a proprietary channel in certain locations. We wanted to maximise business from existing locations and looked at improving productivity. We are taking a hard look at expenditure; we are taking out wasteful expenses, and are sharp at managing costs.

Through volume build-up and flat costs, earnings are improving. However, profitability is still some time away.

Considering the open architecture of bancassurance (banks as brokers), do you see increased opportunities?

The open architecture has not gone live yet. We have been waiting for it since the last five years. We are hoping it opens up in one form or the other and is implemented. Clarity is required---whether it is optional or mandatory, whether it is only for public sector banks or private banks, we do not know. As soon as it opens, we are ready to take the next step.

Is persistency a concern?

We monitor our performance internally through new business premium, renewal premium, expense gap, etc. For us, renewal premium has been an important measure since a long time.

Historically, it has been proven when customers pay renewal premia, it is easier for us to cross-sell other product offerings to them. Various studies have shown you can cross-sell to existing customers if they pay renewal premium. This also improves profitability and builds embedded value.

We are in the retail business and we measure success by how many customers we have. There is a long way to go. We have about 180,000 customers; of these, 30,000 have more than one policy from us. This is good, since ours is still a young company.