18% reduction in workforce aimed at lowering expenses.
Companies may be back to hiring, but private life insurers saw their employee strength fell nearly 34,000, or 18 per cent, during April-December 2009. The cut was aimed at lowering expenses.
According to data collated by the Life Insurance Council, the number of employees declined to 152,874 at the end of December 2009 from 188,645 a year ago.
However, the number of agents increased by 7.59 per cent to 2.98 million during the period as against 2.77 million at the end of December 2008.
The staff strength fell despite an improvement in sales during the nine months ended December 2009. Income from new policies rose 25 per cent during the period.
Individual companies refused to disclose the number of employees on their payrolls.
“Due to attrition, we saw some reduction in our workforce. The numbers should be marginal since hiring also took place during the period,” said Abhijit Gulanikar, chief financial officer, SBI Life.
“Insurers are focusing on profitability and cutting the non-functional workforce. Productivity also went up as the number of employees decreased,” said GV Nageswara Rao, managing director and chief executive officer, IDBI Fortis.
“When people do not meet their sales target, they are forced to leave. Last year was a tough one as companies increased their sales target, focusing more on efficiency,” added a senior executive of a life insurance company.
Cost reduction, driven by companies such as ICICI Prudential and HDFC Standard Life, was aimed at a quicker break-even. In a recent interview, ICICI Prudential Life Managing Director V Vaidyanathan told Business Standard the company would break-even earlier than the 2012 deadline it had set for itself.
Belt-tightening — which includes relocating offices, renegotiating rentals and even lowering expenses on stationary and electricity — is already showing results in the form of a lower rise in expenses. Operating expenses of 23 life insurers dropped to 10.14 per cent at the end of December 2009 compared to 12.24 per cent for 21 insurers a year ago.
“The drop in expenses was possible due to effective cost-cutting measures adopted by the industry. Companies curtailed operating expenses and rationalised their distribution channels, while managing an increase in total premium,” said Life Insurance Council Secretary General SB Mathur.
