Source: BusinessStandard
With “profitable growth” replacing “expansion drive” as the buzzword
in the sector, the country’s top private life insurers have
significantly reduced branches and employees over the last couple of
years to cut costs and improve efficiency.
ICICI Prudential, the second largest private life insurer in the
country, has reduced its branches by nearly a half from 1,923 to 1,000
in the last two years. The top six private insurers, barring SBI Life,
reduced nearly 30 per cent of branches, while the headcount was scaled
down 27 per cent in the same period. Interestingly, the profits of all
these players doubled over the last two years.
Insurance companies have different takes on the matter, terming it
“right sizing” or “smart usage of realty” or “efficient utilisation of
space” but the move to rationalise branch networks was a direct fall-out
of the stringent regulations introduced by the Insurance Regulatory and
Development Authority (Irda) in September 2010. The Irda had raised the
lock-in period and the insurance cover on the popular unit-linked
products.
Top private life insurance players like Max New York Life, HDFC Life,
Birla Sun Life, Aviva Life, Tata AIG Life and Bharti AXA Life all
reduced their branch network between
18-250 in the last couple of years. However, in the same period, SBI
Life, the second largest private life insurance player increased its
branch network to around 714, from 494 as on March 31, 2010.
In terms of the number of employees, these top six insurers have
reduced it by 26 per cent on average. ICICI Prudential Life reduced its
headcount 34 per cent to around 13,200 in March 31, 2012 from 20,000 in
March 31, 2010. Bajaj Allianz trimmed its employee count by more than 30
per cent.
“Our headcount has
remained more or less constant and we have
consolidated our branch network, which has resulted in the company
firmly staying on the path of profitable growth,” said an ICICI
Prudential Life spokesperson.
Over the last two years, all these insurers have improved their
bottom lines significantly and reported net profits, though new business
income across the industry nosedived.
Collectively, these six insurers reported a net profit of Rs 4,106
crore during 2011-12, compared to a loss of Rs 335 crore during 2009-10.
According to the Irda report for 2010-11, the life insurance industry
had reported a net profit of Rs 2,657 crore as against a net loss of Rs
989 crore in 2009-10. Besides LIC, eleven private companies reported
profits in 2010-11.
For instance, while ICICI Prudential Life reported a net profit of Rs
1,384 crore for the year 2010-11 as against Rs 808 crore in the
corresponding period of the previous year, another significant player,
Max New York Life, which reported a Rs 190-crore net profit during
2010-11, has already made a net profit of Rs 572 crore in the first nine
months of 2011-12. Similarly, HDFC Life, which reported a loss of Rs
100 crore last year, reported a net profit of Rs 271 crore in 2011-12.
According to analysts, the move can also be related to the promoters.
Having invested capital for nearly a decade, promoters are now demanding
positive returns.
"In an effort to enhance productivity while rationalising on costs, the
number of branch offices was right sized. However, this right sizing was
done in a manner to ensure that no geography was exited and more
importantly ensuring that customers had uninterrupted service and access
to financial solutions provided by the company," said an insurance
official on the condition of anonymity.
During 2011-12, the life insurance industry's policy issuance was down
eight per cent, whereas for the whole private players industry it was
down 24 per cent.
As a result, the first-year premium collection of life insures, was down
nine per cent to Rs 1,14,233 crore against Rs 1,25,826 crore in the
corresponding period of the previous year.
In the same period, the total collection by the private life insurance industry was down 17 per cent.
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