After freezing branch expansion in 2008-09, slowdown-hit private insurance companies are now closing branches.
Market leader ICICI Prudential Life Insurance has closed 100 of its branches in the last three months and is likely to close several more of its branches after taking a review on a quarterly basis.
Reliance Life Insurance which had applied to the Insurance Regulatory & Development Authority (IRDA) in January for permission to open 400 new branches has said it will not go ahead with the launches, confirmed P Nandagopal, Chief Executive Officer of Reliance Life. Other players such as Bajaj Allianz Life (which has held off expansion for a year), SBI Life, Max New York Life and Kotak Life have also put their expansions on hold.
“We have 2,100 offices of our own besides 3,000 offices of our distributing partners (corporate agents, banks and brokers). In, case we have multiple offices in a location which are overlapping with the presence of our distributing partner, we are rationalizing our reach,” said Satyan Jambunathan, senior vice-president at ICICI Pru Life.
“It is going to be a very considered and a very specific exercise. However we don’t want to shut down branches in such a way that we dilute our geographical presence,” he added.
Private life insurers are now saying that their focus has turned to managing rising expenses, and to ensure that manpower and resources are used optimally.
Says an insurance analyst, “Insurance industry has very high expenses which increased from 2006-07 to 2007-08 despite the revenue (new business and renewal premium) growing at 30 per cent. In 2008-09, the revenue growth may be less than 10 per cent.
“Insurance companies that opened offices and did not manage their expenses will see big losses and the shareholders of these companies will hardly see any value creation in this business.”