The list of private insurance firms freezing branch expansion is getting longer.
After ICICI Prudential and Bajaj Allianz, others such as Max New York Life, Kotak Life and Reliance Life are following suit, while Aviva Life Insurance has said that it will be selective in opening branches, depending on the market conditions.
Private life insurers are saying that their focus has now turned to managing rising expenses, and increasing the productivity of employees and agents, as capital runs scarce.
Says Sunil Kakar, CFO, Max New York Life insurance, “For 2009-10, we have deferred opening of new branches as our existing branches require capital. For 2008-09, we opened 250 new offices and expanded as per the plans."
For April 2008 to January 2009, the private life insurance companies grew marginally by 13 per cent compared to a growth of 82 per cent in same period of 2007-08. Some actually saw a contraction in business.
P Nandagopal, CEO of Reliance Life said, “We increased the number of offices from 745 to 1,145 in 2008-09. In 2009-10, we will not open new offices but will consolidate. However, we will be infusing around Rs 700 crore for 2009-10 and continue to hire new agents.”
Bajaj Allianz had halted branch expansion and stopped recruiting new agents a year and a half ago.
“The expenses per person seem to be going up each year while the revenue per employee is coming down. We felt that this business model is not sustainable,” said Kamlesh Goyal, its CEO.
However, MetLife which has a tiny 1.2 per cent market share, said on Monday it has launched 20 new branches, apparently aiming to catch up while leaders control costs.