After going 100% online, Aegon Life Insurance looks at slow, but steady growth path
Almost two years ago, when Aegon Life Insurance phased out its agents and sold only through the digital channel, its premium collection was expected to take a hit in the short term.It did. In FY17, the insurer’s new business premium was down 33 percent compared to FY16. A year later in FY18, the premiums started to see an increase, even though there is still a wide gap between Aegon Life and its peers.
Aegon Life MD and CEO Vineet Arora believes that it will be a gradual uphill growth path from hereon.
In an interaction with Moneycontrol, Arora said they had taken a bold decision in going digital, and the idea is to use technology to sell simple products. “Volumes may not be very high in the online business, because our focus is on protection business,” he added.
Aegon Life phased out its agency channel in 2016 and now only sells products direct-to-customer without any intermediary. This is a stark contrast to its competitors that sell policies primarily through bank branches or individual agents.
“We were the first company to launch online protection (term insurance) and continue to be strong in the protection space. We are the eighth largest in the protection base and this shows that our strategies are proving right,” he said.
Once agency business was replaced by the digital-sales model, premiums took a hit but Aegon Life's persistency, or renewals, saw an improvement. In FY18, their 13th month persistency (by number of policies) stood at 80 percent (compared to 65 percent in FY17), while that of the 61st month was at 48 percent (from 31 percent in FY17).
“Online business tends to have a higher rate of persistency. This is primarily because customers themselves come to the platform and buy the policy; it is not a push product,” added Arora.
In FY18, Aegon Life collected first year premiums of Rs 147.10 crore, a 61 percent year-on-year (YoY) increase. Their total premium (first year premium, single premium plus renewal premium) increased by 18 percent YoY to Rs 531.2 crore.
Protection to be key business focus
Arora said their digital-only strategy is panning out well because he considers the company to be a protection specialist.“Pure term is the core business in the insurance sector. Now, all our peers are also increasing their focus on the protection business. About 60 percent of the policies sold are protection, while the rest is a mix of unit-linked insurance and savings plan.
The insurance company collected first year premium of Rs 40.4 crore in the April-to-August period, up by 3 percent on a year-on-year basis.
Arora said with their digital-only business, they are able to give more value to customers than the intermediary. In traditional insurance policies, a large portion of the first-year premium is paid as commission to the intermediary.
“We are clear as to what we stand for, and are not in the race of matching premiums,” said Arora.
While the company is still posting losses (with a net loss of Rs 107 crore in FY18), Arora said as long as they sell the right products, profitability will follow. However, he refused to give a target year to achieve break-even. The company was set up in 2008 and most insurers take between seven to nine years to achieve profitability.
The technology push
Unlike other life insurers for whom the direct/digital channel accounts for 8-10 percent of the premium collection, Aegon Life is 100 percent direct. This is another reason why they cannot afford to go wrong in this distribution channel.Aegon Life organised a ‘Hackathon’ for the first time in India on September 20. Their joint venture partner Aegon had earlier held this event in other countries. Here, a winning idea will be implemented as a solution for their customers. Arora said the intention was to bring out an idea that could be used to ease the insurance buying and servicing process for customers.
Dougie Kennedy, Chief Technology Officer, Aegon Life, said they are taking on that challenge of direct selling very seriously.
“We have gone direct and the advantage is that we can make decisions much faster through technology that reacts quickly for customer demands,” he added.
The idea, he said, is to reduce the time a customer spends offline while buying a product. “The touch-points also need to be different so that we take cognisance of customer preferences as well,” he added. Kennedy is also working on making the claims settlement friction-less so that the turnaround time for claims is reduced.
Aegon Life does not have the luxury of physical touch-points like the other life insurers, so data is the king. Tim Kersten, Chief Technology Officer, Aegon Asia, said the whole challenge was to get relevant data and speed up the customer onboarding through use of tools like artificial intelligence and data analytics.
Kersten added that contrary to popular perception, the adoption of technology among insurance customers in India has been high and the next step is to make it simpler to use.
At a time when the life insurance industry is turning its focus to the direct sales channel, Aegon Life has already taken the first few steps. How it sustains the premium collection and what strategies it adopts to achieve profitability in the next few years will be areas the market will keenly watch.
Source : www.moneycontrol.com