Regional policies

Sanjay Jain

Insurance major Bajaj Allianz is reaching out to smaller towns across the country.

Vikas Gupta joined Bajaj Allianz close to a year ago. The 26-year-old was entrusted with setting up an office for the life insurance major in Itarsi, a small town in Madhya Pradesh.

Gupta was in charge of finding a suitable location, negotiating the rent, buying the furniture and even hiring a couple of junior managers to work for him. He's now got four sales managers reporting to him, who in turn supervise a team of agents.

It's not the way most insurance companies in India have grown, but small towns and local recruits are the major planks of Bajaj Allianz's distribution strategy. Having discovered that even the smallest towns can prove rich catchment areas, the insurance company is spreading out rapidly into the interiors.

In just about five years, it has rolled out one of the biggest networks in the industry: at present, Bajaj Allianz has around 900 offices across the country, compared with around 330 for market leader ICICI Prudential.

Before the year is out, it will have more than 1,000 offices covering 586 districts, up from the current 450. Bajaj Allianz will be the first private sector insurance player to have a presence in towns like Akola in Chattisgarh and Uluberia in West Bengal.

"We want to be a mass brand and that's why we're looking at a large footprint. Of course, a geographical spread helps derisk the model, which is particularly important for insurance. Today we earn our premia almost equally from each of the four regions," says Sanjay Jain, marketing head, Bajaj Allianz.

Still, why so many offices? Jain explains that in the insurance business a physical presence is critical. "People need to know we're going to be around, because insurance is a long-term product where the money is paid out after 15 or 20 years."

An office, however small, is a reassuring sign, he adds. Which is why the company has a presence even in towns where the population is less than 50,000, pleasantly surprised by the purchasing power even in states such as West Bengal and Orissa.

The strategy seems to be paying off. For the first time, in FY05-06, Bajaj Allianz notched up a first year premium of Rs 2,715.62 crore, overtaking market leader ICICI Prudential, which earned Rs 2,637.48 crore as premium during the same period.

Observes Arvind Mahajan, executive director, KPMG, "Bajaj Allianz seems to have adapted Allianz's global philosophy "" you're never too far from an Allianz shop "" rather well. It has a more pronounced retail approach compared to others."

The retail approach is combined with one of independence. Once Bajaj Allianz decides on a new location, it typically hires local youngsters to man the office, working on the belief that since insurance is all about trust, customers are likely to have more faith in locals.

The new recruits are given a more or less free hand: they scout around for an office, furnish it, hire managers and agents. "We don't pay great salaries but we give our office heads a lot of freedom. They take almost all decisions including how they want to spend their ad budgets "" whether they want to use hoardings or simply remunerate the agents. In that sense, it's a totally decentralised model," says Jain.

Most offices are small "" around 350-400 sq ft "" and functional, with an eye on cost control. Speed is of essence, and new offices are up and running within a month of the decision to set it up.

At a later stage, budgets and targets are set and agents found. "In some ways it's like an entrepreneurial effort: they [the local recruits] are the ones driving the business through the agents," Jain adds.

Apart from setting up its own offices in smaller towns, Bajaj Allianz has also beefed up its distribution by teaming up with 10 co-operative banks, around 100 district co-operative banks, as well as some regional rural banks to drive business to it. The banks earn a referral fee, so it's an attractive revenue stream for them.

Recently, the company also joined hands with Godrej Aadhar "" the rural retail chain that has around 28 outlets across the country.

"We have agreed to set up shops-in-shops at all Aadhar outlets and we are also talking to other such rural retail chains," says Jain, who adds that the response and interest levels at rural malls has been "a revelation".

Importantly, at every location, whether bank counter or a rural outlet, the company ensures that it posts its own people, the idea being to inspire trust in customers.

While it may use the bank staff for back-office functions, the selling of insurance policies is always done by a company employee. Not surprisingly, Bajaj Allianz already has 18,000 people on its rolls, and will soon be adding another 7,000.

About six months ago, in a bid to strengthen its urban distribution, the company also forged an alliance with GE Money, which has around 200-odd outlets.

However, agents remain the biggest selling channel and so the company ensures that commissions are competitive "" the industry average is around 25-30 per cent. Bajaj today has 125,000 agents, way behind LIC's 1 million but ahead of ICICI Prudential's 100,000.

However, in some of the towns, Bajaj has also used local financial advisors, since it believes the comfort level of the customer may be higher with them than with agents.

In keeping with its regional focus, brand building efforts have also been localised; rather than advertise nationally, Bajaj Allianz relies more on vernacular dailies and slots on regional television channels.

"We even have jingles in Bhojpuri," says Jain. And although Bajaj Allianz hasn't leveraged the Bajaj Auto distribution network, the company admits that the Bajaj tag does help enormously, lowering entry barriers in smaller towns.

Meanwhile, Vikas Gupta, who had never been out of Madhya Pradesh, is just back from a trip to Egypt, a reward for his performance. Whether it's Bajaj or its people, everyone seems to be going places.