Max Life Insurance’s CEO and MD Rajesh Sud says life insurance companies still have to deal with uncertain times as the regulator has not come out with clear guidelines, which could lead to a muted growth in new premium segment. In an interview with Aftab Ahmed, Sud said if current indication from Irda is to be believed, it would amount to getting approvals for 400-450 products. Excerpts
Revenue was up 1% in first half of the year. Do you see any improvement ahead?
Revenue generation has two parts — the new premium and the renewal business. If I look at the nine-month number, we were flat or slightly in the negative zone in new sales, but our renewal business segment is growing. Until there are positive news coming for the industry, it would be difficult to see new sales growing too much for the industry.
New premium growth has fallen. What is your target for new premium growth?
It is hard to take an absolute number. Compared with the industry’s growth figure, we have outperformed in the last three years. We are number-one company for the sixth consecutive year in terms of conservation ratio, which means we have been able to retain our customers. New sales are only one-third of our business, and two-thirds are now from customers renewals.
The industry has been affected after Irda tightened the norms. Do you think there is more clarity and relief from the regulator now?
We are yet to see the final draft of the product guidelines that Irda has cleared. If the last draft version of the guideline is implemented, it would mean about 400-450 products in the industry may have to go through a change. That is a massive task — first to design the change, get it approved and to train the field staff to implement the change. As we saw in 2010, too little time was given to implement the changes. I don’t think we can call it a relief at this point in time.
Do you see a pick up in the business in next fiscal?
I feel, the first positive thing would come from regulatory issues getting settled and clarity emerging on that. The other thing we are hopeful is the Union Budget, where we have been arguing the life insurance industry has a very big role to play in mobilising small household savings and putting them to work for long-term investments for the economy. We hope this to get recognised by the finance minister, who will give specific exemption on the personal investment side. Life Insurance is covered under Sec 80(C), where there are so many competing instruments, including government funds and housing loan repayment, which most of us do. All that leaves almost nothing on the table for life insurance to be specifically exempted.
What would be your capital requirement in the coming year?
At present, we are adequately capitalised. We have R2,127 crore of the capital invested in the business, which runs up to a solvency margin of 551%. That means we have three times more capital than required. We are now profitable and have been generating surplus. Currently, we don’t see requirement of new capital in the company.
Bancassurance has been delayed. What is your stand on the issue?
We certainly expect more consultation. There are many views. Some companies feel this is the right thing to do and some companies believe banks really are not sellers of long term-savings and protection. They are good sellers of shorter tenure investment products. But what does insurance really stands for: Long-term savings and protection to let banks do would require specialisation and I am not really sure they have the commitment to do that separately.