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A couple of years ago, Aditya Birla Sun Life Insurance Co (ABSLI) got more than 90 per cent of its premium income through unit-linked insurance products (ULIP). Then regulatory reforms in ULIPs, which came in 2010-11, compelled a rethink. Like other companies in the industry, ABSLI was also pummelled by those changes.
Margins and profits were under pressure, dropping steadily over the next few years. Simultaneously, the company undertook a product rejig exercise, besides introducing a new distribution model in 2014.
These changes cost money and are usually higher upfront, affecting profits for the past few years. Profits dropped from a high of ₹541 crore in 2013 to ₹123 crore in FY 2017 before rising again to ₹166 crore in FY18.
It has been a slow and painful recovery during the past few years, but the gains are now becoming visible, says Pankaj Razdan, MD & CEO, ABSLI. He is confident that the company has turned the corner and is now poised for better growth in the immediate future.
Along the way, the company has notched up some significant quality gains, too.
Maintaining a balance
The portfolio, which was once excessively tilted towards ULIPs, wears a more balanced look now. About 70 per cent of the premium now comes from traditional products, and only 30 per cent through ULIPs. Persistency ratios, which used to be in the low fifties, has climbed to 75 per cent in FY18.
“Claims ratios are under control, complaints are minimal and productivity is up by as much as 25 per cent over the past three years, even as the number of branch offices are down 10 per cent,” said Pankaj.
Individual life premium rose 35 per cent in FY17 and the company followed that up with a 20 per cent growth last fiscal. Asked to explain this journey and how the company got these matrices to change for the better, Pankaj said the company had become more customer-driven from its product-focus earlier. That involved moving the agency force from ‘selling’ to ‘counselling’, and helping customers understand themselves and their needs better. The company also found that there was a trust deficit and worked on fixing this. As a consequence, there were changes in the recruitment process – instead of going for mass recruitment of agents and then facing a high attrition rate, there was focus on recruiting right at the initial stage itself. This has resulted in attrition rates coming down from a high of 77 per cent in FY16 to about 55 per cent in FY18.
Post recruitment, emphasis was placed on training agents to improve their productivity, including asking them to adopt a cluster methodology – meeting many clients at one go – so that the strike rate and conversion from meetings to sales could be improved. “Agency productivity has gone up significantly and there is more outcome orientation among the agency force because of these measures,” said Pankaj.
There has also been a conscious effort to diversify the channel mix and increase premiums earned through bancassurance tie-ups as well as via the direct channel. The agency channel continues to be the mainstay with about 68 per cent of premium coming in through it, but this is down from the highs of 80 per cent just two years ago.
The company’s market share has grown to 4.7 per cent and it is now in the seventh position in an industry with over two dozen players.
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