The life insurance industry saw strong growth in August, especially by private life insurers. Increased awareness around protection, importance of insurance and under-penetration, and the growth momentum for the life insurance industry is expected to continue.
To understand how the industry is performing and how Max Life Insurance is placed, Prashant Tripathy, MD & CEO of Max Life Insurance, in a exclusive conversation with Moneycontrol, talks about the industry dynamics, the deal with Axis Bank and the outcomes expected. He also touched upon the company's product and distribution mix, COVID impact on pricing and the roadmap ahead for Max Life Insurance. Edited Excerpts:
How’s the industry outlook, considering we are halfway of FY22? How was H1 and how do you see H2?
The industry is doing well and H1 numbers will come out in a few days. In Q1, the private life insurance industry grew at more than 20 percent, and Max Life grew around 34 percent.
The need for life insurance has been well understood one more time through the pandemic period. The momentum continued in July and August also. Even in September, we might see an expeditious growth.
The industry is in a healthy shape and most players are recording impressive growth. Overall, the industry is in full momentum. Of course, there’s a base effect due to the lockdown in the first half of FY21. I wouldn’t be surprised if growth in H2 remains pretty robust. It may be a bit lower now, but we are still expecting a robust growth rate in the second half of FY22.
As the awareness around importance of protection has gone up, how is your product mix looking like?
We have always believed in a balanced product mix. We don’t put all eggs in one basket. We have maintained that trajectory. There’s equal focus on all categories. We have always believed in selling traditional plans.
In the last one quarter, our overall traditional plans, including par and non-par and protection products, would be 65 percent and the remaining 35 percent has been ULIPs.
Within traditional, the categories which are doing well are the non-participating savings plans. During times of uncertainty, people tend to gravitate towards certain outcomes and that’s doing well.
Protection policies are not as strong as last year, predominantly because of COVID, as underwriting norms are still restricted. We are still doing reasonably good business.
As the dust settles on COVID and related fears, protection is going to be a bet for the long term and going to be a strategic area for us.
This year, we have also started to bet on driving retirement annuity sales and we are seeing very robust growth. Overall, the product mix is balanced.
In the second half, we have a slew of new products planned in areas of par, non-par, ULIP, etc. In the first half of FY22, we focused on protection, annuity and riders. By the year-end, we will have new products across all areas.
How’s the outlook on the Axis Bank deal?
Our relationship with Axis Bank is more than 11 years. This year is special as, apart from being the largest distribution partner, they have also become our shareholder. Max Life is now a joint venture between Max Financial and Axis Bank.
It’s a milestone event. It has given enough strength to Max Life Insurance. Having an association and parenthood with a large financial institution is a matter of strength. With their know-how and vast reach, Max Life will be on a journey of multi-year expeditious growth.
The hunger to expand at Max Life has multiplied manifold and we are very open to new relationships. It could be in the areas of organic and inorganic, we would be looking out for areas for growth.
When we talk about organic, we will focus on all elements like banks, small finance banks, fintechs and ecosystem-based growth.
The opportunities of synergies with Axis Bank are humongous. There is a sea change in the relationship. Earlier, it was a distribution relationship, now they have participation in our board. We have frequent meetings with them, and we will work through product designs and marketing efforts, making sure the size is leveraged. The list is endless when two large organisations come together.
Any specific area you would want to strengthen by means of inorganic growth opportunities?
Our bias is to have or acquire complementary skills. It could be in the area of bringing in distribution through banks or a strong agency. It will be in the area of bringing in new skills or geographical presence.
We have our minds open. We are very open to reviewing. At the same time, there will be a bias to look at complementary skills and not just go ahead and acquire.
How is your distribution mix and road ahead to strengthen it?
In the last one year, the contribution of bancassurance went up, predominantly because they were better placed.
On an ongoing basis, little over two-thirds is from banks, and close to one-third is our own distribution. Within our own, a large part comes from agencies, but we have also experimented and proved certain models through our own sales force.
We have registered strong growth in our protection business through digital sales, across counters like aggregators, our own channels etc. We are the number one sellers of protection through digital e-commerce.
While our overall market share is a little over 10 percent, our market share in the digital space is close to 30 percent. Every one out of three customers, when they buy protection products through digital means or directly through e-commerce, that comes from Max Life Insurance.
In the long term, the focus will be on our channels. One of the big task in the next five years is to grow our own channels considerably, and internet or e-commerce channels.
Any new areas you would want to touch upon?
We are going to focus on two segments. One will be in the area of protection – health and wellbeing. Here, we are looking at the entire ecosystem over and above term plans. We came up with riders and wearables, where the new premium could get a discount based on the health consciousness of people.
The other strategic segment is retirement. The retirement market is going to be very, very large, and the way it is currently set up, there will be new opportunities, not in terms of accumulation but in the overall retirement space. We were recently allotted the NPS fund management licence by PFRDA, and we are slowly going to build the retirement business as we move along.
What sort of remodelling and reassessment have you all gone through? Impact on pricing?
It is a question of balancing three things – customer needs, pricing and margins. It needs to be balanced with mortality experience. The good part is that Max Life has done a good job in maintaining these vectors and we will be competitive.
COVID did spike up claims. The good part is that the trend is settling down every passing month, with July being the peak month, and it tapered down in August and September.
I hope that, by year end, it will stabilise, if there’s no third wave. Hence, I’m very optimistic, collectively with our reinsurance partner, we will be able to come up with pricing solutions which take into account both short-term as well as long-term mortality.
The pricing trends are generally upwards. This is how it is expected to be. In a few months, we will know how high it will be. Protection prices in India are still one of the cheapest in the world.
Keeping all three things in mind, customer, price sensitivity and margins, we will take a call which will balance all the three.
Any upper band?
We are competitively priced. We will have some discussions with our reinsurers in the absence of how those rates are moving. It’s hard to say but I’m not anticipating a huge increase. It may be a marginal increase.
How is Max Life approaching digitisation?
We are approaching digitisation in a comprehensive manner, looking at vertical as well as horizontals. The elements of prospecting, onboarding and customer service are going through transformational changes.
Across all channels, 100 percent policies come to us digitally. It gets underwritten through AI/ML-based solutions, which immediately make the decision and that process has been 100 percent digitised.
We have about 85 percent of customer queries coming to us through digital means and getting responded digitally. All the recruitment, and we are a big recruiter of agent-advisors, happens digitally.
The effort is to be a comprehensive digital organisation. We have now two rounds of accelerator programmes, where we ask fintech companies to solve some of our problems, which could be related to onboarding, underwriting, analytics, customer service, etc. This helps our team also to learn and continuously evolve.
Digital is a big play for us, whether in Axis Bank or our own agency. Currently, we are on a multi-year programme to completely digitise our operations and sales.
Growth estimate for FY22?
The target will be to repeat last year’s performance or do better. It is hard to pinpoint a number at this point of time. The first half is lighter than second half. A big part of sales is yet to unfold.
At this point, I’m looking at growth rates, which is upwards of 20 percent. We will definitely target a number, which is upwards of 20 percent.
The fund size of Max Life has moved from Rs 4,700 crore to Rs 100,000 crore now. We recently crossed this milestone. It has been growing at 30 percent CAGR in the last one decade. That’s a reflection of business growth, and a big driver of that has been healthy persistency.
With the Axis Bank partnership taking a new dimension, the business is poised to take the next leap and we are working to create a platform and framework for that growth.
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