According to media reports, India’s top private life insurers have significantly reduced branches and employees over the last two years, to cut costs and improve efficiency.
The reports said that ICICI Prudential Life Insurance has reduced its branches from 1,923 to 1,000 in the last two years. The top private insurers, except SBI Life, reduced nearly 30% of branches, while the headcount was scaled down 27% in the same period. Interestingly, the profits of all these players increased in the last two years. According to insurers, they are making “efficient usage” of space.
The reports added, “Top private life insurers like Max New York Life, HDFC Life, Birla Sun Life, Aviva Life, Tata AIG Life and Bharti AXA Life all reduced their branch network between 18-250 in the last two years. However, in the same period, SBI Life increased its branch network to around 714 from 494 as on 31 March 2010.”
Pankaaj Maalde, head-financial planning, ApnaPaisa.com, adds, “The process of closing branches started after 2008 crisis. The volume has come down in last couple of years, and most insurers are likely to show a negative growth in 2011-12. The awareness is increasing for buying term plans compared to savings plan and ULIPs (unit linked insurance policies) because of the heavy charges.”
He elaborates,” Nowadays, online term plans are also becoming more popular. With sales coming down, naturally private players have to reduce their expenses by closing down their unproductive branches.”
The reports also pointed out that these top insurers have reduced the number of employees by 26% on average. ICICI Prudential Life reduced its staff by 34% to around 13,200 in 31 March 2012 from 20,000 in 31 March 2010.
Bajaj Allianz Life trimmed its employee count by more than 30% to 13,829 in FY11-12 from 20,000 in FY09-10. While, the company reported net profit of Rs. 13.11 billion in FY11-12 compared to Rs. 10.57 billion in FY2010-11 and Rs. 5.4 billion in FY09-10.
Santosh Balan, head-corporate communications, Bajaj Allianz Life, says, “We had 1,050 offices last year and this year as on 31 March 2012, we have 1,044 offices. We have not closed down any of our offices but have moved from rental premises to our own premises. For instance: In Mumbai, we had our offices scattered in different places in north and west suburbs which were on lease basis and we consolidated them into one office which is our owned office in Andheri.”
According to the IRDA (Insurance Regulatory and Development Authority) report for 2010-11, the life insurance industry had reported a net profit of Rs. 26.57 billion against a net loss of Rs. 9.89 billion in 2009-10.
ICICI Prudential Life reported a net profit of Rs. 13.84 billion for FY10-11 against Rs. 8.08 billion in the corresponding period of the previous year. Similarly, HDFC Life reported a maiden profit of Rs. 2.71 billion in FY11-12, which is also the breakeven year for the company.
According to Mr Maalde, the closing down of company branches may interrupt the services which were initially provided to policyholders in that particular area. But, policyholders can continue with the “door-step” service of the insurance companies. Also, policyholders can use online payment system for premium payments. Companies also provide online access of ULIPs for which policyholders have to register once. They have their 24x7 call center services. One can choose any of these platforms with which they are comfortable.”