We need multi-channel distribution

After September 1,2010,when the new Unit Linked Insurance Policy (ULIPs) guidelines came into force,Max New York Life Insurance (MNYL) has outperformed the industry every month. Cumulatively in the seven months from September 2010 to March 2011,in terms of adjusted individual first year premium,the total industry and private insurers recorded a decline of 19 per cent and 35 per cent respectively while MNYL grew by 10 per cent.

Life insurance companies are struggling to find the right distribution strategy with low productivity of the agency model,and banks and big corporate agents negotiating for better commissions. What shape do you think the distribution model is taking in India?

There is a need to create an optimum mix of distribution channels. We believe the focus on multi-channel distribution would increase. While agency will remain the dominant channel,industry will place a higher emphasis on improving knowledge,productivity and retention of agents. Bancassurance is expected to gain importance due to its cost effectiveness and readily available reach.

Much of the growth in life insurance is expected by incraeasing agents productivity and reducing expenses. Therefore the focus from expanding distribution network will tend to shift towards quality of sales through need-based selling. There would also be a greater emphasis on training and development of the distribution force.

The BCG India Insurance report spoke about Indian insurance companies having offices beyond the top 150 towns which are not profitable. How has your experience been on the branches in Tier III and Tier IV cities?

We believe that there exists a market for life insurance in Tier III and Tier IV cities. In mass market,the need for long-term savings takes precedence over protection. There is a latent need for protection and thus products like life insurance which help build the discipline of regular savings along with a protection cover for unforeseen circumstances are relevant in these markets.

To efficiently reach out to these markets there is a need to utilise existing distribution networks. Life Insurance companies should provide substantial training inputs and technology integration to ensure that sellers in these distribution networks are knowledgeable and a quality customer service is provided over the policy tenure.

There have been accusations on the life insurance companies on not fulfilling the rural insurance obligations as mandated by the Insurance Act,1938. What is your perspective on this?

MNYL sees rural areas as an opportunity rather than merely a compliance exercise. We have approached rural markets with a balanced product portfolio suitable for that market and makes it commercially viable. We are one of the few companies to have not only fulfilled our rural insurance obligations but outperforming it every time for years. In the financial year 2011 the obligation was at 20 per cent and Max New York Life achieved 27 per cent.

With the regulatory changes,the focus on term insurance products has increased. What is your business strategy as far as the term insurance segment is concerned?

The Indian consumer prefers bundled products to pure protection plans due to a preference for returns from all financial instruments. As per Life 2010,67 per cent respondents bought life insurance to get good returns from it. The new ULIP regulation gives more importance to the protection element in all such plans by stating a minimum protection multiple of 10 times the annual targeted premium. The basic purpose of life insurance is protection and Max New York Life Insurance has led the market in the protection space having the highest sum assured multiple in the industry.