Customers' needs and perceptions have evolved: Vikas Seth, CEO, Bharti AXA

'There is an increased focus on protection policies'

Vikas Seth, managing director and chief executive officer of Bharti AXA Life Insurance Company, claims there is a shift in customers’ needs and they are demanding more protection policies. He talks to Advait Rao Palepu about the company’s expansion plans, industry trends and how the macro environment will affect the life insurance industry. Edited excerpts:

 

Many life insurance companies are now focussing on selling more protection policies as opposed to savings products. Can you explain the rationale behind this?

The main purpose of a life insurance company is to provide a cover to the customer and their family. Earlier, insurance was viewed as a tax-saving instrument. But, the customers’ needs and perceptions have evolved over time. We are observing a shift towards protection products.

With increased focus on protection, the industry has been evolving, too. We believe this will only increase. These are still early days. In the next 5-10 years, growth of protection policies in the product mix will grow many times.

Does this shift towards protection products mean better margins?

In a life insurance product, margins are a function of the mortality charges, sales practices, the type of customer segments you focus on, and pricing and risk control. It is also affected by the number of frauds and claims. Owing to these factors, across the industry, some companies are making profits, while some aren’t.

Since the start of this year, bond yields have hardened. Now that we are going into an election year, there could be pressure on equities. How do you face these market conditions and ensure policyholder funds keep growing?

The Insurance Regulatory and Development Authority’s (Irdai’s) regulations are well-defined, and put checks and balances so that there is no concentration of risk. We have observed in the past that markets tend to be volatile during elections. The next year is expected to be volatile, both on the bond and the equity sides. There are many issues globally that have repercussions on our economy.

Given the nature of the long-term products we sell, our horizon is longish. Therefore, there will not be any difference for the long-term customers. In fact, volatility can provide excellent opportunities to increase investments.

How has your experience been with the Pradhan Mantri Jeevan Jyoti Bima Yojana, especially since it is aimed at improving financial inclusion?

I think the plan of a mass life insurance scheme is wonderful idea. We recently tied up with Airtel Payments Bank (APB) to deliver this. We are leveraging the bank’s vast network to reach deep rural pockets and serve those who are under-insured. The payments bank has more than 100,000 touch points across the country and the strategy is to improve financial inclusion and life insurance penetration by servicing Bharti Airtel’s 300 million customers.

Insurance players that have strong bank partnerships have also had a good experience. From the time we partnered APB in July, there has been an uptick in the sale of policies under this scheme.

This is a first step towards our journey to insure India. Given the standardised product, the focus for us, currently, is to increase our reach and distribution, and to educate the customers about the benefits.

What are the company’s expansion plans?

Our focus is to be profitable and sustain growth. With this in mind, we aim to be among the top 10 life insurers within two years. We are expanding our branches and the agent base in order to reach out to the remotest parts of the country. This year, we have already added 30 branches and many more will be added. We are recruiting agents across the country. Apart from focusing on efficiencies, we are looking at organic and inorganic opportunities to expand and are talking to both private and public sector banks for bancassurance.