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At a time when the macro-economic situation has been tough and the life insurance industry is itself undergoing regulatory changes, the industry is looking to sustain its business. However, there have been some life insurance players who have not seen a growth in premium, but have also posted profits.
HDFC Life, which posted consolidated net profits of Rs 281.83 crore for the quarter ended June 30, 2013, as compared to Rs 11.92 crore in same period last fiscal (as per first quarter results of HDFC) has diversified its distribution mix to reduce dependence on any channel. Vibha Padalkar, Executive Director and Chief Financial Officer, HDFC Life said that they have been able to post higher profits since they have concentrated on direct selling which includes online policies and branch walk-ins, apart from doing business though bancassurance.
'We have only brought out those products which the market needs. Hence, it is based on the market trends,' said Padalkar. She further said that a company makes profits when a policy stays in their book for a longer time. HDFC Life, she said, has achieved the growth, due to the higher levels of persistency.
Reliance Life Insurance achieved net profit of Rs 56 crore for the quarter ended June 30, 2013, which was more than 150% rise compared to previous year. Anup Rau, CEO, Reliance Life said that the company has been able to maintain a healthy growth and profit on the back of enhanced agent productivity.
'Hiring of additional agents has been one of the factors for the profitable growth. However, agent productivity has been a key focus area. Increasing agent productivity has contributed to a healthy first quarter. It has helped us improve our business and ranking without the support of any big bank alliance,' said Rau. He added that as Reliance Life Insurance is concerned, they are confident of registering a double-digit growth this fiscal.
While some companies are still running into losses compared to the previous years, bank-lead players have been posting healthy profits. PNB Metlife India, according to its public disclosures, posted profit after tax of Rs 9.9 crore for the quarter ended June 30, 2013, which was almost flat compared to same period last year's profits of Rs 11.5 crore. Rajesh Relan, Managing Director and Country Manager, PNB MetLife India said that as an insurance company, profitability is more a result of health of existing business rather than new business.
'Our business plans from 2014-16 is getting firmed up and we are looking at a healthy growth for PNB MetLife and gain in market share. In the previous year, when the market was down by about 15% (premium income), excluding group business, we grew by 15%. We are focused on growing our embedded value through the long term regular premium business. In this segment, we expect to grow above the previous year,' he said.
Being a bank-led player has also been an advantage for PNB Metlife. Relan said that they have grown the business by increasing their bancassurance footprint and growing agency business profitably. Growth is no longer done merely by hiring new agents but making existing agents productive and building a professional agency force. Our number of overall agents has not gone up much but the number of productive agents has increased.
Reducing operational costs has also been a key to stay profitable. PNB Metlife, for instance, has maintained a healthy expense ratio on the back of larger business through bancassurance and also putting a variety of efficiency measures in place. Relan said that for instance, they have deployed systems in all bank partner branches which help deliver over the counter service to all customers. This, he said, helps them bring overall costs down by a major margin.
One of the largest bank-led players ICICI Prudential Life Insurance has digitised processes to reduce costs and maintain profitable growth. According to ICICI bank's first quarter results for 2013-14, ICICI PruLife's profit after tax for Q1 2014 was Rs 364 crore compared to Rs 349 crore for Q1 2013.
Puneet Nanda, Executive Director, ICICI Prudential Life said that they have extensively adopted technology in an endeavour to provide customers with a smooth and engaging on-boarding experience. 'Technology has not only enriched the customer experience but also enabled the company to significantly increase efficiencies. Providing superior customer service and involving customers at every step of the purchasing exercise through our need-based selling approach strengthens the foundation of our relationship with them. This we believe has contributed significantly for us being able to stay firmly on the profitable growth path,' he said.
The company had begun this exercise a few years ago. ICICI PruLife has introduced the Sell Online platform, where technology has been incorporated as an important part of sales process.
Going forward, use of technology, reducing overall costs and offering long-term products is the 'mantra' according to these companies to stay profitable. Nanda said that complete digitization is their goal and it has enabled them to significantly reduce turn around time. Reliance Life's Rau said that operational cost and expense management have to be an ongoing focus area – in challenging times, for sure, but also in the good times.
With the industry entering a new phase due to the revised traditional product guidelines, experts believe that the key to growth would be to stick to long-term premium business. 'We continue to focus on growing our embedded value through the long term regular premium business. In this segment, we expect to grow above the previous year,' said Relan.
