Alok Rungta, MD & CEO, Generali Central Life Insurance
The life insurance industry is passing through a challenging phase with slowdown in growth this year amid recent regulatory changes, as well as the waiver of Good and Services Tax (GST) on individual life policies. In comparison to the push the GST waiver has given to health cover sales, life insurance lags behind, though long-term growth prospects appear bright. Alok Rungta, MD & CEO, Generali Central Life Insurance Company (formerly Future Generali India Life Insurance,), talks about the company’s plans ahead and trends in the life insurance segment. Edited excerpts:
The life insurance industry growth has slowed down of late. How do you see this, and what are the current trends in the segment?
It has been been a bit slow this year. The average growth rate in the year so far is between 8 and 9 per cent. The trends in the past and the projections have always been in the range of 12 to 15 per cent. The industry is undergoing a lot of change. Sometimes it seems the pace of change is too much to deal with, and there are temporary sidewinds because of those changes. For example, if you look at the last three–four years, there was a cap of 2.5 lakh for tax purposes, and then on savings, there was a cap on tax for more than 5 lakh. Then, there were new regulations that came in that liberalised commission in a way. But commission deregularisation in any industry, which is distributor-driven, can lead to some implications. Last year, we had a big change on the special surrender value from the October 1. And now we have the new gift from the Finance Minister in the form of waiver of the GST. We are going through a curve of redesigning and reorganising to be more effective. That’s why you see some slowdown because of the ongoing readjustment.
What has been the impact of the changes in the surrender value norms on insurers in the last one year?
I have been personally looking into it. Not a big change in the behaviour patterns of persistency so far. We are still in the very early days. October 1 was when we started selling. The early trends are not as disturbing as one would have thought. But again, these are very early trends.
How is the industry, including Generali Central Life, managing the cost burden in the wake of GST waiver on individual life policies? All private insurers have reduced commissions, right?
There are two–three ways to manage it. One is what we can share with the distributor, whether it is agent or third-party, or in many cases bancassurance. Second is how efficient we can be on the expense side because now all expenses are plus GST. So, we can go back to the drawing board and see what expenses we can be more efficient with. And third is, can we look at some sharing from the customer? Now, the DFS and the regulator have come out clearly that you can’t pass anything on to the customer. So, they have ruled out the third option. So, we all have started working with our distributors. There were some guiding principles that the Life Council CEOs agreed on, and everybody started acting on it. It’s not one-size-fits-all; depending on the distributor, we are looking at managing it differently. But definitely out of the ₹14,700 crore of approximate burden, half is this alone. So, instead of trying to manage many things, if you manage one thing, 50 per cent of the pain can be managed. So, that’s been the effort by the industry since last October. We are in mid-November now. In the last six to seven weeks, we have been discussing with all types of partners and distributors and finding solutions to tide over the impact.
While the non-life insurers and standalone health insurance companies have been witnessing some push in sales on account of GST waiver, why is it not happening in the life segment?
Somehow the awareness of the need for protection is not deep yet, but Covid-19 helped health insurance come to the forefront. There are some more factors due to which people are not buying protection. As Indians, we are ambitious, risk-takers and forward-looking. So, we don’t manage risk appropriately. Culturally, financial planning and financial risk management are not embedded in our education system. Then there’s the frugalness of the economy. For example, people are still happier having a TROP (term plan with return of premium) rather than a term. Things will improve going forward, though.
How has your company’s profitability been? Are there plans to infuse capital?
We had a tough signature of profit in the past few years, but happy to say last year we closed at a ₹6 crore loss. The year before we were at around ₹110–113 crore loss. So, we have been progressively improving our quality of business, scale and efficiency. We are on that trajectory and near break-even if I can say that. But this year, we have a new bank partner. So, we are again in the hyper-growth stage. We have a three-year capital outlay cleared by the board two weeks ago and both shareholders have blessed it. While I am not yet at liberty to quantify and discuss, we are in hyper-growth mode and will double our business in three years. There are 90 branches at present and 20 more will be added this year. And every year, we will add at least 15-20 branches. But that’s only for agency business, which is growing at roughly 20 per cent. We are also present in Central Bank branches, which gives access to 4,500 branches. About 4,200 branches have been activated already in the last three months. So that’s another hyper-growth engine as the bancassurance is a big driver for growth. .