Aviva Life targets 20% growth in new sales

Aviva Life Insurance is bracing up for 15-20 per cent growth in new business sales in the second half of this financial year as insurance companies have begun to register growth after reporting decline in sales during April–September 2011.

“We registered 25 per cent year-on-year growth in September 2011. Growth is back as the industry is stabilising now. It is also because of the low base effect,” said T R Ramachandran, chief executive officer, Aviva Life Insurance.

The life insurance industry has been hit badly since September 1, 2010, when the new unit-linked insurance plan (Ulip) norms came into effect. With new norms in place, insurance schemes in the market became redundant and insurers had to re-launch Ulips. Agent commission also fell by half and many agents stopped selling Ulips.

Ulip sales were impacted. For Aviva Life, prior to September 1, 2010, Ulips accounted for 80 per cent of overall sales that has now fallen to 55 per cent. The insurer expects it fall further to 50 per cent.

To increase its distribution channel and raise addition capital, Aviva Life Insurance is in talks with Syndicate Bank to divest equity stakes.

Confirming the move Ramachandran said, “Discussions are in preliminary stage right now. We have made a presentation to Syndicate Bank. Talks are on.” He did not divulge the percentage of equity Aviva is willing to divest.

Aviva Life insurance is a joint venture between Dabur and UK’s Aviva, holding 74 per cent and 26 per cent stake, respectively.

Many life insurance companies are trying sell a part of their equity in their of long-term distribution partnership. Recently, MetLife sold 30 per cent equity to Punjab National Bank and Max New York Life Insurance sold 4 per cent stake to Axis Bank. More companies, such as Reliance Life Insurance and DLF Pramerica, are trying to divest stakes for bancassurance partnerships.

Aviva Life is also looking forward to open architecture, where banks will be allowed to sell products of more than one insurance company.

The Insurance Regulatory and Development Authority (Irda) had set up a committee to look into open architecture. The committee recommended banks should be allowed to tie up with two insurance companies. At present, regulator is studying recommendations but is yet to take a final call. “Open architecture is good for both the insurance industry and the customer. If open architecture is allowed, then, customers will have more choices,” said Ramachandran.

Bancassurance channel accounts for about 25-30 per cent of new business sales for the insurance industry.