The life insurance industry is redesigning for faster growth: Generali Central Life MD&CEO Alok Rungta

Alo Rungta, MD and CEO, Generali Central Life Insurance

The growth of the life insurance industry has slowed recently. How do you see this and what are the current trends in the segment?

This year it was a bit slow. The average growth rate so far this year is between 8 and 9 percent. Past trends and forecasts have always been between 12 and 15 percent. The sector is undergoing many changes. Sometimes it seems like the pace of change is too fast to handle, and there are temporary crosswinds as a result of those changes. For example, if you look at the last three to four years, for tax purposes there was a tax ceiling of Rs 2.5 lakh, and for savings there was a tax ceiling of more than Rs 5 lakh. Then, in a sense, new rules were introduced in that liberalized commission. But the deregularization of commissions in any sector driven by distributors could lead to certain implications. Last year we had a big change in the special surrender value from October 1st. And now we have the new gift from the Finance Minister in the form of GST waiver. We are going through a process of redesigning and reorganizing to be more effective. Therefore, you will see some delay due to the constant adjustment.

What impact have the changes in surrender value standards had on insurers over the past year?

I personally looked into it. So far, there has been no major change in the behavioral patterns of persistence. We are still in the early stages. We started selling on October 1st. The early trends are not as troubling as one might think. But again, these are very early trends.

How is the sector doing? including Generali Central Life, managing the cost burden in the wake of the VAT exemption for individual life policies? All private insurers have cut commissions, right?

There are two to three ways to manage it. One is what we can share with the distributor, whether it is an agent or a third party, or in many cases a bancassurer. Secondly, how efficient we can be on the cost side, because now all expenses are plus VAT. So we can go back to the drawing board and see which expenses we can manage more efficiently. And thirdly, can we look at what the customer is sharing? Now the DFS and the regulator have made it clear that you cannot pass anything on to the customer. Therefore, they ruled out the third option. So we all started working together with our distributors. There were some guiding principles that the Life Council CEOs agreed on, and everyone started acting on them. It’s not one-size-fits-all; Depending on the distributor, we look at how we can manage this in a different way. But certainly of the estimated burden of ₹14,700 crore, this is half alone. So instead of trying to control many things, 50 percent of the pain can be controlled if you control one thing. So these are the sector’s efforts since last October. We are now mid-November. Over the past six to seven weeks we’ve been talking to all kinds of partners and distributors and finding solutions to bridge the impact.

While non-life insurers and independent health insurers have witnessed some increase in turnover due to the VAT exemption, why is this not happening in the life segment?

Somehow the realization of the need for protection is not yet deep, but thanks to Covid-19, health insurance has come to the fore. There are other factors that prevent people from buying protection. As Indians, we are ambitious, we take risks and we look ahead. So we are not managing the risks properly. Culturally, financial planning and financial risk management are not embedded in our education system. Then there is the austerity of the economy. For example, people are still happier with a TROP (term plan with premium refund) than with a term plan. However, things will improve in the future.

How has your company’s profitability been? Are there plans to inject capital?

We had a heavy profit margin in the last few years but are happy to say that last year we closed with a loss of ₹6 crore. The year before, we had a loss of around ₹110-113 crore. So we have gradually improved our business quality, scale and efficiency. We are on that trajectory and almost break even if I may say so. But this year we have a new banking partner. So we are once again in the hypergrowth phase. Two weeks ago we had a three-year capital investment approved by the board of directors, and both shareholders approved it. While I don’t have the freedom to quantify and discuss this yet, we are in hyper-growth mode and will double our revenue within three years. There are currently 90 branches and another 20 will be added this year. And at least 15-20 locations are added every year. But that only applies to the agency activities, which are growing by about 20 percent. We are also present in Central Bank branches, which provide access to 4,500 branches. About 4,200 branches have already been activated in the past three months. So that is another hyper growth engine, as bancassurance is a major growth engine. .