Strategy shift may delay break-even, says Aegon Life Insurance CFO

Aegon Life Insurance Company, which expected to achieve breakeven in 10 years (around FY19), will see that getting delayed by two to three years, Rajeev Chugh, Chief Financial Officer of the company, said.

Last August, the company shifted its strategy from a multi-channel presence to a more focussed digital one.

A fallout of this was that it exited the agency channel (except for renewal of existing policies).

The number of agents is now down to about 4,000 from about 6,000 then.

The second pillar of the strategy was to have a direct-to-customer engagement with relationship managers appointed for the purpose.

These managers would self-source as well as cross-sell policies to existing customers (about five lakh customers to whom the company has sold policies over the past eight years).

The third pillar of the new strategy was to focus on group protection business which would give access to a bigger base of customers.

For this, the company is working with wealth managers and equity brokerages so that their clients can be tapped, Rajeev said. The immediate impact of the change in strategy was a decline in premium income last fiscal — it came down to ₹91 crore in FY17 from about ₹136 crore in FY16.

But Rajeev said that this was the result of a mid-course correction and will even out during the course of the next two years.

This year, he expects the company to grow at about 50 per cent, so the turnover may touch ₹150 crore.

While he concedes that this growth is still on a low base, he points out that the shift in emphasis will also see 70-80 per cent more customers than was the case two years ago at a slightly lower turnover, he said.

On capital infusion, Rajeev said that if current growth levels are maintained, another ₹150 crore would be required during the next two to three years.

If growth were faster, then the capital requirements would also go up accordingly.

The company is currently capitalised at about ₹1,800 crore.

Aegon will aim at restoring the value proposition of insurance to its original goal of protection rather than treat it as a savings product, Rajeev said.

This will translate into almost 60 per cent of the policies sold in the current year being pure protection/term as against about 40 per cent of such policies sold in the previous year.

Illustratively, a life insurance policy (with a major savings component) will have life coverage of about 10 times the premium paid — but most times this will hardly be sufficient for families faced with a sudden loss of the breadwinner.

The same premium if directed into a pure term plan may offer a much higher amount that will provide for the legal heirs/successors leading a better life than without such recourse.

Very often, the absence of sufficient thought at the time of buying a policy can lead to a less-than-optimal solution for distraught families, Rajeev said.