Private players look at hinterland to drive growth

The scorching pace of growth in the life insurance business, along with a two-way competition between private players and the Life Insurance Corporation (LIC) and among the 16 private players themselves, is likely to see a 25-50 per cent increase in number of branches in the current year.

Private companies are expected to blitz the market with 50,000-1,00,000 new agents, a bulk of them chipping away at the monopoly of LIC in smaller cities and towns.

Eyeing a big growth in selling volumes and increase in ticket size of policies, private biggies such as SBI Life, HDFC Standard Life, Bajaj Allianz, Kotak Insurance, ICICI PruLife, Aviva, Max NewYork Life and others have been sizing up aggressive plans for major expansion to Tier II and III markets. Many feel that almost 50-60 per cent of sales can come in from these towns.

With the aggressive new entrants, LIC, the strongest among life companies, is likely to face threats to its near-monopolistic hold in smaller towns and cities.

The new entrants are sharpening their weapons for an assault on LIC's life insurance empire. Bert Paterson, managing director, Aviva Insurance said: "We've extended to 187 branches covering the full geographical spread of the country, including rural areas. We are reaching out to customers in close to 500 locations and are successfully following a dual distribution approach".

Trevor Bull, managing director, Tata AIG Life, also has a similar strategy. "As part of our overall strategy of expansion, we wish to have a major presence across the country.

The second stage of expansion will be largely in the second and third tier towns," he said.

According to Sanjay Tripathy, head marketing, HDFC Standard Life, research among people in smaller towns indicated that customers are much more open to a private insurer these days, mainly due to brand awareness and their high disposable incomes. The company's objective is to be one of the top-most considered brands in all non-metro markets in India.

A recent report by Macquarie Research Equities points out that LIC is being challenged on its own turf.

"In the last two years, the private life insurers have been rolling out to the smaller towns, with Bajaj Allianz having set the trend two years ago. We think this will put LIC under more pressure.

"Anecdotal evidence suggests that private players tend to make a large impact on LIC's market on initial entry into a particular geography. This process is intensifying as most of the major players are on a large distribution push through FY3/07 and FY3/08E," the report stated.

Source: DNA Money