Sale of high-value policies picked up from mid-Mar: Kotak Life Insurance MD

With the financial year (FY23) having drawn to a close, Mahesh Balasubramanian, Managing Director, Kotak Life Insurance, spoke to Subrata Panda on a range of topics

Mahesh Balasubramanian, managing director of Kotak Life Insurance, speaks to Subrata Panda on a range of issues, including how the company performed in FY23, the pick-up in sale of high-value policies, as well as the impact of the new commission and expense of management regulations. 

Edited excerpts:

How did the firm perform in FY23?

One of the goals that we had set for ourselves is to grow more than the average of the industry. As of year-to-date February, we are growing faster than the industry. March numbers are yet to come in but I am sure we are on course to grow better than the industry. March has been a big month for most players as high-value policies (Rs 5 lakh and above premium) got into action because of the tax arbitrage and typically March is a busy period for life insurers. I am confident that Kotak Life will be among the top growing players in the industry.

Did high-value policies see a fire sale in the later part of March?

Sometime in the middle of March, it started picking up. Before that, people were getting aware of the facts around it. By March 15, one could see the tailwinds coming in because of this. I am sure when we see the final March numbers, the tailwind will be visible. This March probably would be bigger than any other the industry has seen. March is always a cyclically high month but year-on-year growth in March 2023 will be quite high.

Is there any impact of the decision to tax high-value policies by the government?

(It’s) too early to say but will there be any impact? The answer is yes. Because if there was no impact, then March would not have been such a big month. Customers who wanted to avail of the tax benefits have availed. Having said that, as an industry, we will wear our thinking caps and see how better we can attract these sets of customers, who are subscribing to such high-value policies. Similar things happened in the unit-linked segment but it did create a huge dent for the industry. We have to improve our value proposition to these segments and perhaps make them look at this segment from a protection perspective.

Does the company have any concrete plan to offset the impact of this decision?

All of us do have plans and are thinking on what needs to be done to better the value proposition for this segment. There are other products we have, such as term insurance and unit-linked. Our par segment is also quite powerful. Also, we are at the peak of interest rates so the non-par segment will not lose its sheen suddenly. So, whoever wants to avail of higher interest will also be attracted to this segment even though the tax dispensation will be different.

What do you make of the expenses of management and commission regulations?

We thank the regulator because increasingly they are moving towards principle-based regulations, rather than rule-based because we are a matured market now. So, it was time to go to the next level of regulatory evolution, wherein the regulator is saying let’s give the individual companies and the boards to decide and move towards a market-led commission structure rather than the regulator administering the commissions each company is paying. So, it speaks of the maturity of the market that we are moving towards. Secondly, anything which allows the free market principle to apply has its advantages because a one-size fits all normally comes with a lot of handicaps of not being able to do certain things, which one would normally do.

Analysts reckon these regulations put the unlisted players at an advantageous position?

Shareholders would like a firm to be run in a particular manner, whether you are listed or not. And, they would like the company to do business in an economical way. Hence, there is no arbitrage that exists from a listed–unlisted perspective. It is unlikely that the commissions would go up and we could use this to address one of the major problems of the industry — persistency. Why should renewal commissions be always flat? Good agents should be awarded for better renewals because renewals mean better persistency. The flexibility that the companies will have will bring in dynamism in the way we do things.

Irdai chairman has asked companies to augment capital to grow faster. Will you look to raise capital?

Yes, we would like to grow faster. But, as far as capital is concerned, we are adequately capitalised. Our solvency is in the range of 2.75–2.80. This gives us tremendous room for expansion. We are part of the illustrious Kotak Mahindra Group so when the need arises, they will certainly put in more capital.

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