While regulatory guidelines are made with good intent, they need to consider the impact on the industry, says AS Narayanan, chief distribution officer, Bajaj Allianz Life Insurance. In an interview with Vishwanath Nair, he talks about how Bajaj Allianz wants to leverage on technology to improve reach in rural and Tier II and III cities, as it grows 15-20% over the next two to three years. Excerpts:

How has the current financial year been for you so far? What is your outlook for FY14?

The last nine months have been fairly good for Bajaj Allianz Life Insurance. As on December 2012, we managed to bring in new business worth R1,804 crore compared with R1,595 crore in last year, which is a growth of around 13%. Our renewals this year were R2,500crore compared with R3,150 crore of the previous year. Overall, our gross written premium is R4,312 crore as on December 2012 compared with R4,740 last year. Forward, we expect to grow 15-20% in next 2-3 years, provided market and regulatory conditions remain stable.

What are you doing to increase your reach?

As a fallout of the recent guidelines, there was significant attrition in the individual agents. So, we are trying to increase distribution through various other avenues in addition to agents, like increasing bancassurance tie-ups and exploring online. In addition, we are enhancing our use of technology, thereby, reducing capital investment. An increased usage of technology will help in deeper penetration. Today, nearly 70% of our business comes from Tier II and III, which is an indicator of our reach in these areas. Rural areas are becoming more technology driven and we believe in next 5-10 years, rural areas will operate their finances through high-tech infrastructure. This will include buying insurance online and paying premiums, which will reduce our operational costs to a great extent, thereby, helping in increasing profits. Our penetration will get deeper, as we are approaching more and more banks and NBFCs.

Industry is still awaiting clarity on the bancassurance guidelines. What are your expectations?

The bancassurance guidelines are a welcome step for non-bank promoted insurers, like us. But the regulator is yet to firm up the decision on the final guidelines, based on the feedback from other companies, who may have a different opinion. We are eagerly waiting for the final draft of the guidelines to decide the future course of action.

What about product design guidelines, which are yet to come up?

We feel some of the guidelines have been restrictive in a product category and, thus, do not encourage innovations. For example, derivatives in insurance can be a category, customisation of products for the poor and HNI clientele should be allowed. Such recommendations will give us more scope for innovation. In short, the regulator should provide room for innovation in guidelines, as there are various demands/needs of the customer that need to be complied with, but may not always be in line with the regulations put forth. Another important aspect to be considered is the impact and the rollout of these guidelines, as it has a cascading effect on various operational areas. We need to change everything from the marketing material, to the training of distributors, who may not always be in support of the new guidelines.