Suresh Mahalingam, MD & CEO, Tata AIG Life Insurance Company Ltd holds a Masters in Business Administration from IMI, Delhi.He was the Chief Operating Officer in his earlier role at the company. Prior to joining Tata AIG Life Insurance, Mr. Mahalingam has had worthy experience for almost three decades in diverse institutions like ITC, Indian Communications Networks and HDFC Standard Life. With over 30 years of experience in the FMCG and BFSI space driving marketing and sales; Suresh brings with him credible expertise, knowledge and unmatched skill sets. At HDFC Standard Life, Mahalingam was instrumental in propelling the Company from the 7th to the 3rd best life insurance player. As a part of ITC, his aggressive business acumen helped the Company achieve decisive marketing victories across India.
Tata AIG Life Insurance Company Limited (Tata AIG Life) is a joint venture company, formed by Tata Sons and AIA Group Limited (AIA). Tata AIG Life combines Tata’s pre-eminent leadership position in India and AIA’s presence as the largest, independent listed pan-Asia life insurance group in the world spanning 15 markets in Asia Pacific. Tata Sons holds a majority stake (74%) in the company and AIA holds 26% through an AIA Group company. Tata AIG Life Insurance Company Limited was licensed to operate in India on February 12, 2001 and started operations on April 1, 2001.
Replying to Yash Ved of IIFL, Suresh Mahalingam says “Health insurance in India is expected to be Rs270 bn to Rs300 bn market by 2015 & Rs600 bn to Rs720 bn by 2020.”
Give us a broad overview of the life insurance industry?
Since the opening up of the sector in 2001, the industry has undergone a major transformation with an enhanced penetration for overall industry (premium as percentage of GDP) from 2.3% in 2001 to 5.2% in 2011. The market has emerged and expanded from 5 incumbents (1 life, 4 non-life) to nearly 45 players today.
Size of Life Insurance Industry: Along with the increase in penetration, there has been a massive increase in the number of people covered. In Life Insurance, the number of policies in force has increased from approximately 20mn in 2001 to approximately 230mn in 2010, a nearly 12-fold increase. The size of the life insurance market in terms of Total Premium is expected to grow nearly 4.7 times at a CAGR of 15% from around Rs 2315 Bn in 2009 to Rs 10772 bn in 2020. In terms of AUM, the life insurance industry is expected to grow nearly 5.7 times at a CAGR of 17% from around Rs. 7200 Bn to Rs. 41300 Bn.
Health Insurance Industry: Another significant increase we can observe is in the space of health insurance. The number of lives covered through health insurance has increased from just 2mn in 2001 to nearly 55mn in 2010, a nearly 25-fold increase. Health insurance industry in India is expected to register robust growth rate in coming years and will see a CAGR of around 25% during FY 2010-2014. Health insurance in India is expected to be Rs270 bn to Rs300 bn market by 2015 & Rs600 bn to Rs720 bn by 2020.
In the current situation, what are the opportunities and challenges?
India remains one of the most dynamic markets for our industry with positive long-term economic drivers like steady GDP growth and rising per capita income. Furthermore, the size of the earning population of India cuts a bigger pie as compared to the rest of the world in this decade.
In spite of this, as per a recent Swiss Re report entitled “Swiss Re Mortality Protection Gap: Asia Pacific 2011”, the Mortality Protection Gap in India exceeds US$ 6.6 trillion.
Hence, there is huge potential for long-term savings and protection products in India and so our offerings will emphasize these two aspects driving alignment with customer’s needs at different stage of life cycle. Considering this, our core competence is in area of offering protection against 5 most likely risks associated with different stages of lifecycle viz:
- Risk of living too short
- Risk of living post a disability or major illness
- Risk of not being able to save enough for children
- Risk of living too long
- Risk of not being able to create enough wealth
The challenging issue before the Indian life insurance industry today is to achieve sustained profitable growth. The industry was privatized a decade ago, but the life insurance industry has been struggling to achieve the same in the face of operating losses.
The key concern areas today are:
- Developing a leaner and effective controlled distribution model
- Customer Life cycle Management vis a vis needs leading to enhanced customer retention
- Regulatory impact – short transition time
The last 10 years has been the story of growth and more growth. In the next few years, we will see a lot of emphasis on consolidation and growth achievement through productivity enhancement. There would be more focus on fact finding and documentation of customer risk profile leading to an increased weight age on training and development of insurance professionals.
India not only has a huge population of un-insured people. Even those who are insured are mostly not adequately insured. Internationally, an individual buys life insurance 7 times during his/her lifetime. In India, the average number of policy for an insured individual is below 2 which imply a huge growth opportunity. I see the growth in the next few years coming to a large extent from both cross selling and up-selling to existing insurance clients. In addition, I also see majority of growth coming from semi-urban and rural areas.
The sale of simple insurance product on the internet will see a more positive trend and insurance servicing will see new heights of technological brilliance. I see the coming years as challenging in terms of meeting growth objectives as also consumer expectation, a challenge that will yield better results for the industry and help it emerge even stronger.
What steps should the regulator take to boost the sector?
The overall regulatory focus appears to be in the right direction as it is urging the insurers to improve operational efficiency and customer centricity. There is, however, a concern on the momentum of change and the time available for implementation. These have led to a decline in sales in the short term which in turn has lead to a period of uncertainty in the industry.
While the opportunity in India remains significant, there needs to be a balance among growing the industry, ensuring there is right financial inclusion, transparency in that customers are fairly treated.
What are the new launched products in the coming months?
In the last few months, we have launched a series of new products on the Unit Linked platform catering to both people who want to invest in the short term with long term growth perspective , as also those who want to invest & secure financial goals over a long term through regular annual payments.
We launched the following 3 products viz:
A Limited Pay ULIP Endowment plan called InvestAssure Maximizer with option to pay premiums for just 5 or 7 years for a mid to long term goal between 20 to 40 years. This plan also has the option to choose a Death Cover equal to Sum Assured plus the accumulated Fund Value.
A Limited Pay ULIP Whole of Life Plan called InvestAssure Gold Supreme with option to pay premiums for just 5 or 7 years for a life time cover of till age 100. This plan is ideally suited for building a retirement corpus as also for legacy planning.
A Regular Pay ULIP Endowment plan called GYANKOSH with a view to protect one’s financial goal for children and loved ones.
Our product strategy will revolve around our core competence of managing an individual’s financial risk by developing relevant, compelling and differentiated protection-centric products to meet the staggering Protection Gap in India. In line with our core competence, we are gearing up to welcome the New Year with a bountiful offering that will cater to various customer needs in the area of financial goal protection against the 5 risks enumerated by me earlier.
Comment on expansion plans, restructuring business and capex plan:
Life Insurance is an industry with a long term perspective. Insurance industry in India has opened up to private players for a little more than 10 years, so it is in its infancy. However, if one is looking for a valuable return over time, this industry can prove to be the right place. Capital for growth is important and the key element there would be to ensure that the growth is profitable going forward. For a company like us, capital is not an issue for both our promoters Tata and AIA as they are committed to this business for the long term. We are sufficiently capitalized as of now.
For the new financial year, we need to maintain the growth momentum for which we need to focus on products that we launch, customer segmentation and productivity of our distribution channel. We also need to focus on profitability management driven by productivity growth and expense optimization. In the past few years, companies were concentrating only on growth. As margins are shrinking, the key is to be able to increase volume at every level, efficiency per branch, per employee.
Brief us about your new brand campaign?
On 1st December, we have released the first of a series of a new communication campaign that reiterates the importance of inculcating strong values and foundations. The Tata Brand has always stood for strong values with the right Foundation and this very principle is at the heart of our latest communication.
The new TV commercial, conceived by Bates India, starts with a family on a breakfast table. When the child on the table is served his breakfast, the father suggests to his child to say, “Thank You” to the domestic help who has served him. When the child hesitates, the father reiterates that the child should say, “Thank you”. Finally the child does, and the commercial goes on to say that, “You make the right start of teaching your kids, we will protect their future”. The crux of the communication leverages the importance of not only building a foundation of strong values but also for laying the foundation for a strong Protection plan. The communication ties in with our core business philosophy of offering to our customers a financially secure future for themselves and their loved ones.
Today amid rampant consumerism, “Thank You” film is relevant not only from a brand point of view but also from a social perspective that calls for passing down of fundamental values to children by their parents.
As a pre-cursor to the launch of this campaign, Tata AIG Life has also conducted on-ground programs to reinforce the importance of Protection and Healthy Living activities amongst school children.
What are your views on foreign participation in insurance?
As of now, we all know that the Parliamentary Standing committee rejected the proposed amendments in the Insurance Bill to accommodate a 49% FDI limit. As and when the FDI rule changes, our promoters Tata and AIA would jointly take a call on their percentage of ownership in the business. We strongly believe that the Indian market has enormous growth opportunity and both our promoters are committed to the business in India.
Brief us about your financials?
Despite a short term impact due to revised guidelines issued by IRDA, Tata AIG Life posted a net profit of Rs 51.79 crore in FY 2010-11 and achieved Break-even in the 10th year of operation. Highlights of our H1 results are given below:
- Tata AIG Life posted a net profit of Rs 97 crore in H1 of FY 2011-12
- Total premium income for H1 of FY 2011-12 stood at Rs 1703 crore. Of this, the new business premium collection stood at Rs 471 crore, renewal premium collection at Rs 1232 cr – growth of 7% over same period last year
- Unit Linked Insurance Products accounted for 59 per cent of the new business premium for the Individual Business
What kind of hiring are you looking at?
Recruiting new agent is an ongoing process, so we would continue to recruit new agents. On an average we recruit 1900-2000 agents per month. A “Professional Agency Force” is key to the future of India’s life insurance industry.
We have recently launched what we call “Premier Agency” in India. We will, through Premier Agency, try to foster global best practices .The goal is to transform agency from a scale-led growth model to productivity-led growth.
We will utilize a comprehensive Distribution Effectiveness programme that will encompass:
- Quality Selection and Recruitment of agents based on an agreed criteria and process
- A Consistent leader selection and development process.
- Foster skills development with a view to creating a professional and productive agency force through mandatory and structured training targeted at ensuring they focus on the customer need.
Having a premier approach to agency gives you insights in to market needs:
- Find a focus on longer term savings and protection which reflects the markets’ needs through a “need based selling process.”
- Development of enhanced technology based sales management tracking and reviewing system.
- The Premier Agency approach promises to contribute towards sustainable profitable growth. We reported statutory profit of around Rs. 100 crore in the first half of the Indian fiscal 2011-12, after registering our first statutory profit of Rs.52 crore in the financial year end March 2011.