Q&A: Suresh Mahalingam, Tata AIG Life

'Scale is no longer a growth engine for life insurers'

With changes in the regulatory landscape, productivity and profitability have become the new engine for growth for Tata AIG Life. Suresh Mahalingam, CEO, Tata AIG Life Insurance Company, tells Niladri Bhattacharya the life insurance industry is going through a phase of introspection and consolidation and once that is over, expansion will happen automatically. But for this year, there will be no expansion. Edited excerpts:

It’s been a year since the new regulations came in. How has Tata AIG Life responded to the new regulatory regime?
The regulatory change will have a positive impact in the standpoint of the customer. Basically, the guidelines had increased the protection element. What we are currently seeing is a consolidation phase for the industry. Proactively, we have adapted to the changing needs. We have recalibrated our product mix, with a higher protection element as a fundamental strategy. All the products we are launching are based on this strategy. Initial results are encouraging. For instance, we launched three products in June and these are contributing 18-20 per cent of the total product sale in the unit-linked space. We are seeing a positive trend on a month-on-month basis. The product mix has changed in favour of traditional products. The proportion of unit-linked insurance products (Ulips) has come down to 60 per cent of products from around 85 per cent a year ago.

 

As a company you have also undergone some restructuring in terms of growth strategy. How is it different from your earlier stance?
Over the last 10 years, it was “scale” that defined growth, so people were growing aggressively in terms of branches, people and products. Taking into account the changes in the regulatory landscape, the growth engine would be all about productivity, profitability and quality. Hence we are concentrating on sustainable and profitable growth strategy. The strategy was more in terms of how we would grow close to the market, to customers and intermediaries. Therefore, the emphasis is on productivity, customer retention and service. Keeping this in mind, we moved from a vertical to a more decentralised structure, so that we can remain closer to the ground.

Tata AIG Life has brought down the number of branches and headcount over the last one year. What are your expansion plans this year?
The insurance industry is going through a phase of introspection and consolidation. Once that is over and as we see more opportunities, expansion will happen automatically. But for this year, there will be no expansion. We are roughly adding close to 1,500-2,000 agents a month, but we don’t have any recruitment or branch expansion plans for this year.

Expansion need not be seen in the context of number of branches opened, or addition of new people. The entire emphasis of Tata AIG Life is productivity. It means what you currently have is producing more. We are focusing on improving the infrastructure in all our existing branches, skill enhancing of the existing employees — all these adds to productivity. As a part of this strategy, last year we merged some of the branches which were low in productivity. The number of employees came down due to natural attrition as we did not fill all the positions.

How do you want to grow your distribution network?
The growth will come thorough multiple channels. We cannot remain depended on one channel if we are to do a sustainable business. We want to be present in all channels, be it agency, third-party distribution or bancassurance. Currently, 60 per cent of our business comes from the agency channel. We have also grown our third-party distribution channel over the last few years and currently we are one of the top players in that space.

What about bancassurance channel?
Currently, we have United Bank of India as our bancassurance partner. We are waiting for the final bancassurance guidelines. As and when the channel opens up, we would like to explore it.