One Reason Dominant Life Insurers Are Facing A Challenge

One segment of India’s insurance market is changing. More so during the pandemic.Traditionally, bank-owned life insurers leveraged the parent’s branch network to outgrow peers. But non-bank-run firms grew faster during the pandemic. Partly because selling through multiple banking partners has helped them bridge the distribution gap. And product mix and pricing helped.Life insurance ventures of Max Group, Tata Group, and Bajaj Group recorded growth in April-December 2020. But peers owned by some of India’s biggest banks saw their annualised premium equivalent contract.Max Life Insurance Co. has been the top performer in the first nine months of the fiscal. Max Life also did well in the quarter ended December, while Tata AIA Life Insurance Co. and Bajaj Allianz Life Insurance Co. grew more than the industry average in two of the three months.“Benefits from open architecture or multiple banking partners is what's worked well for these non-bank-promoted entities,' Nidesh Jain, research analyst at Investec, told BloombergQuint. Tata AIA benefited from increased penetration through its partnership with HDFC Bank Ltd., while Bajaj Allianz and Max Life continue to benefit from strong sales via Axis Bank, he said, adding that Bajaj has also tied up with other banks.The open architecture was allowed starting in April 2016, helping non-bank-owned insurers to expand their reach. Bank-owned insurers have started strengthening other distribution channels as approval to tie up with multiple banks partly negated their advantage..Jain of Investec said HDFC Life's growth was lower than non-bank-owned peers in the first nine months the ongoing fiscal account of a high base. SBI Life and ICICI prudential life saw lower growth due to underperformance in sales through their parent banks as they were not aggressive during the pandemic, he said..Max LifeThe insurer recorded its highest-ever sales for December, driven by an impressive performance across bancassurance, agency, and e-commerce channels, Prashant Tripathy, managing director and chief executive officer, said. An increase in premium per policy has been the key driver, he said.The insurer is the second-best agent productivity in the industry, according to Dolat Capital. Investec's Jain also said that it has the best agency channel among peers.Dolat Capital said an increase in sales of non-participating and protection policies helped as the insurer benefited from lower pricing of protection products. Max Life has not passed on the full reinsurance price hike to customers, unlike peers like HDFC Life Insurance Co. and ICICI Prudential Life Insurance Co., it said.Max Life’s ULIP portfolio also has a lower share of equity-oriented funds than peers, making it less volatile than that of ICICI Prudential and HDFC Life, the brokerage said.Bajaj AllianzStrengthening of product portfolio and increased sales of guaranteed-return products and term plans have also worked well for the player.The individual rated new business premiums from guaranteed products more than doubled in nine months ended December over a year earlier, Tarun Chugh, managing director and chief executive officer, Bajaj Allianz Life, told BloombergQuint. “Over the last few months, we also strengthened the product portfolio keeping the increased risk perception of customers in mind.”The number of policies sold grew in double digits in two out of three months in October-December, better than bigger peers.Digital sales along with better distribution network enabled growth, Chugh said. The company has strengthened its distribution network with newer bank partners and direct sales channels, enabling it to expand its customer base further, he said.Tata AIAAn increase in ticket size—sales value per customer—led to growth, according to Investec.Naveen Tahilyani, managing director and chief executive officer, cited three reasons for growth: accelerated digitisation of business models; focus on protection or term plans; and its Param Raksha ULIP plans..Other HighlightsOverall, HDFC Life was the best performer in all three months of the quarter ended December.November was the worst month of the quarter as both private insurers and the state-owned Life Insurance Corporation of India saw contraction due to a high base.LIC saw its annualised premium equivalent fall more than half before rebounding in December..In the nine months ended December, private players contracted 6% compared to 11% decline for LIC. Overall, the industry contracted 8%.Private life insurers had a market share of 59% in the nine months, while LIC had 41%.While SBI Life remains No. 1, Max Life’s market share rose, bringing it on a par with ICICI Prudential Life in December.

One Reason Dominant Life Insurers Are Facing A Challenge

During the pandemic, one segment of India’s insurance market turned upside-down.

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