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Private insurers in a crunch as markets tank

business Updated: Oct 22, 2008 20:42 IST
Falaknaaz Syed
Falaknaaz Syed
Hindustan Times
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In a nation of 100-crore people, you would think the growing economy would make private insurers in a liberalised industry hit it big. But, with losses mounting, some of the hottest expansion plans are running for, well, cover. Capital is scarce, and the current global mood of a financial meltdown is bound to add to the woes. Cost-cutting, productivity and consolidation are the order of the day.

ICICI Prudential Life Insurance, the largest private life insurer with the highest capital base of Rs 4,580 crore, has decided not to make significant additions to branches and also slowed hiring of agents. The company has 2.78 lakh agents and had opened 1,050 branches in 2007/08.

That is also true for Bajaj Allianz Life insurance. Says Kamesh Goyal, CEO of Bajaj Allianz Life. “Since last one year, we have not expanded by increasing branches and are focusing on controlling costs.”

Eight years after the state-dominated sector was liberalised, only one new player, SBI Life Insurance, has managed to break even.

Private life insurance companies which were registering close to 100 per cent growth last year on the stock market boom that made Unit Linked Insurance Plans hot have seen their growth slowing down to 50 to 75 per cent this year.

“We are looking at profitability for shareholders and managing costs as we go along,” said Paresh Parasnis, general manager, HDFC Standard Life. “This year we are deepening our presence in the existing markets and will have a total of 610 branches against the current 572.”

Explains Gaurang Shah, managing director, Kotak Life Insurance, “Now, availability of capital will not be that easy and shareholders will begin asking questions.”

According to Life Insurance Council data (a self regulatory body of life insurers), in 2007/08, some 18 insurers infused Rs. 16,235 crore between them in capital.