architecture structure of bancassurance...Archana Singh
In the financial sector, the new ‘bancassurance’ architecture has become a much-discussed topic of interest. So, here’s what it is all about in the words of Anuj Agarwal, MD and CEO – ‘’the bancassurance architecture will allow to banks to tie up with multiple insurers, will drive the new business premium collection for Bajaj Allianz Life.’’ In an interview given to Business line, he elucidated that the company has its main focus on structuring its own proprietary direct channel and expects it to contribute extensively to the business going forward.
When asked why Bajaj Allianz Life has seen has seen individual new business premium collection decline, while the life insurance industry, in general, has seen it grow, his prompt answer was that if taken a look at the current fiscal, in terms of overall growth - only around 38 per cent has come from group business premium. The individual business premium collection has not brought in much growth for the industry. In individual premium collection alone, approximately 70 per cent of sales for the private sector is through the bancassurance channel. He laid stress on the fact that as an agency-led company, Bajaj Allianz will be looking forward to the open architecture structure of bancassurance, which commences in April.
He also went on to explain his company’s current product mix, saying that for the period ending February, Bajaj Allianz’s mix is 52 per cent unit-linked insurance plans (ULIPs) in individual business and 48 per cent conventional or long-established products. The new IRDAI regulations allow banks to tie up with up to three insurers. However, banks have not articulated any interest in tying up with other insurers. Overall, he directed towards the fact that things are moving speedily on the bancassurance front behind the scenes. He stated that his company is pitching for multiple bank partners. He also pointed out that while it may not make sense all at once but for the banks which have their own life insurance companies will show interest as it is a part of their valuation, for banks that have not endorsed life insurance companies, most of them would like to offer this choice to the customer.
In very simple terms, he explained that Bajaj Allianz Life Insurance is presently focussed on the micro-insurance space. He said that Bajaj Allianz started their direct channel from July and that they are seeing significant footing. He said that the company wants to build up its proprietary direct channel now and, going forward, it will be a sizeable provider to business. The insurance regulator has made it clear that it wants insurers to bring down expenses. What impact will this have on the industry? He believes that it is a positive step from the customer’s point of view. Last year, Bajaj Allianz brought down their overall expenditure ratio by 13 per cent and this year, they want to reduce more than that. In terms of total expenses, bancassurance-led insurance companies will have lower expenses because of their structural advantage and agency players will find it more complicated.
He also mentioned that he felt there would be some changes in the manner the regulator is planning to allow insurers to structure agency commissions. He added that the industry is also expecting another commission circular. He feels that there might be a slim diminution in the upfront agency commission for traditional products and that overall, commissions would get more levelled out.
He, however, dodged the question of whether or not Allianz will raise stake in the company saying that it is by all means, a shareholder’s question.