Birla Sun Life expecting revenue for the first time

Birla Sun Life Insurance, which is in its tenth year of operation, is expected to report profit for the first time for the year 2010-11. Changes in regulatory requirements regarding unit-linked insurance plans (Ulips), effective from September 1, 2010, have not had much impact on the company’s margins.

Life insurance business has a high gestation period and the companies do not report profit in the first few years of operation.

“The company reported profits in the first nine month period ending December 2010. Despite changes in regulations, we have done well. We do not foresee any contraction in margins in our business. We will have three to four per cent edge in margins over the industry. I can not share exact details. The company will come out with results in a few days,” said Mayank Bathwal, CFO, Birla Sun Life Insurance.

“We feel the business opportunity in life insurance is still very high. Now the product is much more attractive for customers. One just needs to find a profitable formula to adequately compensate distributors,” he added. Average commission paid to agents has fallen to 6-7 per cent of the premium post September 1, 2010 compared to 15 per cent earlier.

However, the product mix of the company has drastically changed in favour of traditional plans. Composition of Ulip in new sales has fallen to 55 per cent in 2010-11, from over 95 per cent in the previous year.

“There was a big change in regulations, but now the momentum is coming back. We see a good positive trend month after month. We are moving fairly quickly where we can start showing growth,” said Bathwal.

The company is also looking into its distribution model. At present, 70 per cent of new business is generated from its agents, 15 per cent from bancassurance (its partner banks which sells Birla Sun Life Insurance products) and the rest from brokers. “We want to increase sales from non-agency channel. It is our focus to have a much better distribution mix,” said Bathwal.