With HDFC merger failing, Max Life wants to be a digital organisation

India’s insurance companies are finally coming of age. With the government’s renewed push on insuring citizens, Max Life Insurance is not only marching towards market dominance but is also in the process of reinventing its game.
 
The process perhaps started with a bid to merge with HDFC Life in August 2016, which would have created an insurance giant but even though the merger fell through due to the Insurance Regulatory and Development Authority of India’s reservations about the same. However, Max Life maintains that even though the merger would have been good for both entities, the company has become stronger than ever and continues to grow organically even as inorganic growth opportunities remain far and few.
 
“The companies were really at the top of their game. But that apart, we have been a very well run company. There are public sector players where platforms have been established and we think that we can acquire some of them,” said Rajesh Sud, managing director, Max Life Insurance.
 
Consider the numbers. The firm collected Rs 34.20 billion in premiums till February in the current financial year, a growth of almost 20 per cent year-on-year (y-o-y). This followed the 25 per cent growth recorded last year and 8 per cent a year before that. Among its products, individual non-single premium policies grew premiums the most as growth of 25 per cent was seen in 2018 over last year.
 
The insurance industry as a whole recorded a premium collection growth of 17 per cent y-o-y till February. Max Life policies grew 18 per cent in 2018 after a growth of about 1.9 per cent in the preceding year. The company has also maintained its position among the highest claims settlement providers, with 97.7 per cent claims settled in 2017.
 
Max Life is now focussing on growing its digital base as the organisation looks to become an all-rounded digital entity, Sud said. “The thrust is to be digital to provide higher value to customers and make the organisation more efficient,” Sud said. “Digital is an all encompassing change not just sales. It’s about the ecosystem, sellers, building a digital organisation.”
 
He said the company was not only looking to sell its policies online but also going digital in its internal processes, which would allow employees to mark attendance and even provide policy document digitally, reducing human cost and effort. Recently, the firm launched an online-only unit-linked insurance plan. Sud said about 19 per cent of new policies sold come from digital channels and it would rise.
 
Experts, however, have their fair share of scepticism about the viability of digital-only models when it comes to complex insurance plans as they require more human assistance than what a website can provide. “Everyone is looking to go digital and almost all private players have one or two online products, as it reduces channel and distribution costs. However, it is hard to imagine all policies being sold online because complex insurance products require human guidance and it is difficult to explain them just on the internet,” said Kartik Srinivasan from Icra, who tracks the insurance sector.
 
Srinivasan said digital sales now occupy 15-20 per cent share of new business by insurance companies.
 
But what about Max’s plans to grow inorganically? A company insider said it was looking to acquire a substantial stake in IDBI Federal, which would give it access to large number of policyholders and make it easier to scale up.
 
“We are in the second shortlist among the contenders for the IDBI deal and if it goes through, there will be synergies because IDBI might be struggling financially but it remains a strong organisation,” the source said.
 
But Sud remained non-committal on the IDBI merger and said “information will be shared when something materialises”. He, however, didn’t rule out chasing inorganic and organic growth opportunities in the near term.
 
“We are constantly scouting for new ways to grow both organically and inorganically. So while we strengthen our proprietary sales channels which are doing well, we will always be looking for the right partnership opportunities in whichever way they come,” he said.
 
Udit Kariwala from India Ratings spoke to Business Standard and said the current wave of consolidation among insurance companies is sparked by the growth ambitions of the well-placed private players and exit-seeking public sector undertakings (PSUs) that are struggling to make money.

“Private players are now looking to tap into companies to build their networks and strengthen their already strong businesses, while public sector ones are not in a good health and they could be looking for easy exits,” he said.
 
The insurance regulator also allowed banks to have multiple insurance partners against one each allowed currently in both life and non-life insurance. Max Life is taking this opportunity to expand its bancassurance network by tapping into more banks which could reduce its dependence on Axis Bank and YES Bank as its preferred partners.
 
“Now we do need new banks to come in or existing banks to open up to new products. We are constantly looking to find the right handshake. We don’t want to lose existing partners. A large part of the growth is contributed by the banks,” Sud said.
 
Even as Max Life scouts for more partnerships and growth opportunities in the market, the company is also developing an integrated marketing strategy to make sure that its marketing dollars are spent efficiently. The company spends about Rs 200 million a year on marketing. This year it plans to use a substantial chunk on digital mediums.
 
“We are looking at an integrated marketing strategy which will utilise all our channels and increasingly digital mediums and social media to engage with our prospects and build our message. We are considerably strong with digital and have well known partners like Google. We are quite thoughtful about how we spend our marketing dollars,” Sud said.