Max Life Insurance looks at life beyond Axis tie-up
MUMBAI: Max Life Insurance Co. Ltd is strengthening its proprietary sales channels after Axis Bank Ltd ended an exclusive bancassurance partnership with it by entering into a similar arrangement with the country’s largest insurer, Life Insurance Corp. (LIC) of India.
Max Life’s partnership with Axis Bank accounted for 55% of the insurer’s revenue in the year ended March 31. With Axis Bank agreeing to distribute LIC’S insurance products, investors fear Max Life may potentially lose a part of its business from the bank. To be sure, Axis Bank isn’t the only bancassurance channel for Max Life. It has also tied up with other lenders, including Yes Bank Ltd.
“We are seeing good growth number from them (Axis and Yes Bank) as well. Apart from that, we have Lakshmi Vilas Bank, which again is a partner to us. We have a long list of other smaller urban cooperative banks that we work with and also quite actively engaged in the conversation with the public sector banks,” Rajesh Sud, executive vice-chairman and managing director of Max Life Insurance, said in an interview.
Sud said Axis’s partnership with LIC won’t affect the business that Max Life generates from the bank.
“It expands the market for them (LIC and Axis) but doesn’t take away anything from us,” Sud said. “Our growth rate in Axis is as steady as before even after LIC coming in; in fact it has accelerated.”
Cumulative premium collected from the partnership between Max Life and Axis was ₹24,000 crore, covering about 1.5 million people.
Max Life has devised a six-pillar strategy to boost growth, after a proposed merger with HDFC Life Insurance failed to get regulatory approval and a subsequent bid to acquire IDBI Federal Life Insurance collapsed, according to Sud.
“It (Max) bid aggressively as it had the confidence of deriving value out of a bancassurance deal,” said Avinash Singh, an analyst with SBI Cap Securities Ltd. “However, the management chose to walk out of the deal when it did not get a commitment from the current promoters of IDBI Federal on addressing the externalities, and on a performance guarantee.”
The bid to acquire IDBI Federal was largely driven by the state-run insurer’s bancassurance arrangement with its parent, IDBI Bank.
Shares of Max Financial Services Ltd, the parent of Max Life, have declined since it announced the merger with HDFC Life. Shares of Max Financial Services rose to a high of ₹628 on 9 February 2017 from ₹550 when the merger was announced in August 2016. They
declined to a record low of ₹424 after Max Life decided against pursuing IDBI Federal.
“Our strategy clearly is to continue what we have been doing well, which is organic growth and we are now putting a fair amount of investments behind our own proprietary channels,” Sud said.
Renewed focus on organic growth could reduce the contribution of business coming from Axis, Sud said.