Explain customers that Pvt.Cos. are sinking ships!
ICICI Pru. alone closed 360 offices!!
No need for IRDA approval to close office!!!
No need for IRDA approval to close office!!!
The new guidelines on unit linked insurance plans (Ulips) have forced life insurance companies to shut branches, retrench staff and restructure operations to control rising expenses.
As per the latest data available with the Insurance Regulatory and Development Authority (Irda), about 454 branches have been closed this financial year, most of them after June when the new Ulips structure was unveiled by life insurers.
“Life insurance companies have reported to Irda that 454 branches have been closed by them during the five months between April-August 2010. Of these, ICICI Prudential Life accounts for 360, HDFC Standard Life 32, Max New York Life 31, and MetLife Insurance 19,” a senior Irda official told Financial Chronicle.
“Higher productivity has become the key word. We are looking at consolidating some of our branches and resizing some of the others to manage expense,” Amitabh Chaudhry, managing director and CEO of HDFC Standard Life Insurance told FC in an interview.
According to him, the company will first shut excess branches in cities. “This would definitely mean some of the staff have to leave,” he said.
A senior ICICI Prudential official said, “Some of the non-performing staff have been asked to leave. We have shut branches concentrated in the same area.”
Max New York Life’s spokesperson said the insurance company was realigning its distribution infrastructure and consolidating offices.
“In the near term, given the regulatory changes that have come about, we are in the process of adjusting our distribution infrastructure to reflect these changes. This will involve consolidation of some of our offices through which we offer products and services. These changes will create better efficiencies while ensuring the same quality of service to our policyholders and agent advisers. This will have some human impact but we ensure that all performing employees are not impacted by this change,” the spokesperson said via email.
Lower productivity of branches and agents came under spotlight after the financial meltdown of 2008-09 hit insurers. New guidelines by Irda would hit the margins of life insurers by 15-20 per cent because about 80 per cent of their new business premium used to come from Ulips.
According to a senior employee of Max New York Life in Mumbai, who wished to remain anonymous, eight branches were shut in the past few weeks in Mumbai alone, costing about 140 jobs, as new Ulips guidelines squeezed margins. Six more branches are likely to be shut soon, he said.
Max New York Life had 33 branches in Mumbai city. To reduce headcount, the management has started implementing an out-of-turn performance evaluation and those at the bottom are shown the door. “The most affected are the operational staff while sales staff is expected to work harder to generate as much volume of business as it used to be,” said the employee.
First generation life insurers that started operations in 2000-01 had incurred huge expenses to expand reach by adding branches and frontline sales force. The expense ratio of all private life insurers range between 18-25 per cent.
According to G Murlidhar, chief operating officer of Kotak Mahindra Life Insurance, the company intends to bring down the expense ratio from 18 per cent to 12-13 per cent in the short term. “The company is still examining ways to bring down cost. The options are to either close down branches and not replace the people we lose to attrition among others,” he said.
Life insurers need Irda’s approval to open a branch, but to close one they just have to inform the regulator. According to the Irda official, about 420 branches were closed in 2009-10 while 403 branches were opened by new entrants.
Source : Financial Chronicle
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