If we get an opportunity, we'll look at acquisitions: Rajesh Sud

Interview with Managing director & chief executive officer, Max Life Insurance

The top life insurance companies are seeing an uptick in unit-linked insurance products (Ulips). However, Max Life Insurance Corporation is looking cautiously at it. Rajesh Sud, managing director and chief executive officer, talks to M Saraswathy about this and other matters. Edited excerpts:

The private life insurance sector is showing positive growth in new business premiums, though in single digits. Will this continue?

The growth is not uniform across players. The top five to six are able to garner growth, backed by an established distribution network, comprehensive suite of products, tied partners and good capital backing.

Ulip sales have clearly led to growth in the private life insurance segment. Have you seen an uptick, too?

The premium growth has also been driven by a swing towards Ulip products, coupled with sales of Ulips through banks.
This is because people have been buoyed by the stock market performance and because Ulips are attractive, overall, from a charges’ structure perspective.

However, we as a company remain cautious about whether customers who’re buying are aware of the risks inherent in the product. Research has shown that the Ulip phenomenon has been largely restricted to the high net worth and urban population segment. If markets have been going up, they could come down as well, as seen in the past few days. Overall, this is a long-term product and should be bought and sold for the right reasons.

We have seen an improvement in Ulips and we have said we will sell to needs. There has been an uplift in Ulip sales but it is not dramatic and is around 30 per cent of our portfolio.

Your profitability has improved. Has the reduction in expenses contributed to this?

We have been able to do well on persistency. Our conservation ratio (amount of business underwritten in the previous years that is getting renewed each year) is hitting closer to 84 per cent, and the actuarially measured 13th month persistency is at 78 per cent. Our expenses have been reducing year on year and our mortality controls have also been good. However, with regulatory changes, the profit margins overall have come down.

The number of products in the market has also been lower, owing to many pending approvals. Have you faced any constraints?

The regulatory changes on the traditional products side has led to constraints in manufacturing of products and in getting products approved. We have 14 individual and three group products that have been approved and more are pending approval.

You recently launched a guaranteed income product. Are more products on the anvil, since the fourth quarter is the most active for the sector in terms of sales?

We hope to get more products approved, some in the area of term plans. There are also riders to get protection component come alive much better, individual and group riders. The capacity choke that we (as a sector) had seen should now ease out. We have ensured we space out product filing systematically and hope that approvals are also systematically given.

The passage of the Insurance Laws (Amendment) Bill is set to open new possibilities. Has the company decided which route to take for infusing capital?

The Bill will allow for multiple options, based on each company’s stage of development and need. Those of us who are profit-making, dividend paying and very solvent on capital might want to look at other ways of discovering shareholder value, like Initial Public Offers, among others. Capital can also come in to support acquisitions for well-run companies.

We are clear that if we would get an opportunity, we would look at acquisitions and discover ways of finding value for our shareholders, too. The good part about Max Life is that we have all our options open and do not have a pre-committed arrangement with our shareholders.

Bancassurance has been among the most active of distribution channels. Bank-led players have seen good premium growth.

Banks mean an institutional access to customers and, hence, this channel will do well. The real challenge is to get the agency working and sustaining success and motivation. There is a high attrition rate at both agent level and at the front-line sales level.

Banks have wealth customers, where there is financial planning and need-based products. There is also the mass affluent customer segment, where there is a need for quick selling and having a simpler product proposition. With both our bank partners, Axis Bank and YES Bank, we have been able to get this right.