Want our protection segment to be in double digits: Kotak Life MD & CEO

'We believe there is a huge opportunity in the protection and annuity segments', said Balasubramanian

Kotak Mahindra Life Insurance Company (Kotak Life) has grown faster than the industry so far this financial year. Hopefully, this trend should persist. Mahesh Balasubramanian, managing director and chief executive officer, Kotak Life, in conversation with Subrata Panda talks about the company’s focus areas, impact of changes brought in by the regulator, among others. Edited excerpts:

How has business been so far this financial year?

Business has bounced back. The base effect had a role in it. Until July, the industry had seen growth of 29 per cent in individual business — we grew 39 per cent. Overall, we saw 45 per cent growth, while the industry grew 40 per cent. It will be interesting to see how the rest of the year turns out. I am hopeful that the industry will see at least 25 per cent growth in adjusted annualised premium equivalent.

Which product segments are driving growth?

There has been growth because different players focus on diverse segments. We have a balanced approach. Our book has one-third par, one-third non-par, 20-21 per cent unit-linked products, and balance protections.

We believe there is a huge opportunity in the protection and annuity segments. We would definitely like to increase our protection business on the retail side. We would want our protection segment to be in double digits. But we have a long way to go.  

Retail protection demand is still a straggler. When do you see it picking up?

There were challenges in the protection segment. We have seen some demand corrections. The group protection business has grown consistent with credit growth. Supply-side constraints are improving, but still not back to pre-pandemic levels.

The underwriting limits have gone down. The underwriting standards have become stringent. These have led to some friction in the process. But demand will be back. These are transient cycles.

Insurers and reinsurers will keep taking a look at rates. Before the pandemic, we were on a soft rate regime. Some hardening of rates happened — in part due to the pandemic. Moreover, those prices were not sustainable. I don’t think there will be any further rate hikes. One is hoping rates will stabilise and over a period of time go back to being lower than what they are now.

Is there a plan to relax some of the underwriting standards that were tightened during the pandemic?

It’s a discussion insurers and reinsurers will have to have. In certain segments, some degree of relaxation has happened. We are also looking at alternative ways of making sure the medicals can happen. We need to look at ironing out areas of friction by making it easy for the consumer, and also by increasing the limits and relaxing the underwriting norms.

Are you looking to retain more on your books to shield from rate hikes by reinsurers?

We have relooked at our retention because we have an adequate solvency margin. Our retention levels are higher than what they were last year.

Is there a plan to increase your market share, which is around 1.55 per cent?

We would like to grow higher than the industry average. It is difficult to pinpoint the precise market share we will have. If the industry grows at 20 per cent, we would like to grow at 30 per cent. This will ensure our market share keeps increasing.

Is it possible to achieve the growth targets prescribed by the regulator?

The targets given by the regulator are more directional in nature because the regulator wants to double the penetration of insurance.

The development aspect of the regulator has taken precedence compared to the regulatory aspect in the past — this is a welcome sign. As far as targets are concerned, each company needs to look at its stage of evolution, solvency requirement, shareholder view, etc.

From our perspective, this calendar year has been one of our best in terms of distribution. We had about 230-odd branches. This year, we will add 65 more. The bigger the footprint, the bigger the penetration — and higher the number of agents. We are also looking to grow our direct business.

What is your view on the Insurance Regulatory and Development Authority of India’s proposal on capping the commission and linking it to management expenses?

These are draft regulations. We are examining the proposals. The impact will be different for different companies. We will give our feedback to the regulator on this. Directionally, the regulator wants insurance companies to be more efficient than what they were in the past. At the same time, they also want market forces to play out in terms of commission. It also wants to place a cap on how much companies can pay as commission in case the management expense is higher than the permissible limits. In spirit, these proposals are in the right direction.

Is there a plan to list the company any time soon?

We have a networth of Rs 4,500 crore and our solvency is 2.7x. There is no pressing need for us to raise capital because we have good solvency and it can easily meet our growth aspirations.

Kotak Mahindra Bank is best positioned to take a call on whether it wants to list or not.

Disclosure: Entities controlled by the Kotak family have a significant holding in Business Standard Pvt Ltd