Jobless growth in private life insurance

Jobless growth has found a new home - India's life insurance companies. In the last financial year, private life insurers reduced headcount by 27 per cent to achieve profitability.

The number of people employed by these companies as on March 31, 2011, was 60,215, as against 81,507 in the corresponding period last year. They closed down more than 900 branches. Also, 174,000 agents went out of the system.

In the same period, they shored up their bottom lines. For example, ICICI [ Get Quote ] Prudential and Bajaj [ Images ] Allianz, the top two private life insurers in terms of profitability, reported net profits of Rs 810 crore (Rs 8.1 billion) and Rs 1,060 crore (Rs 10.6 billion), respectively, for the year ended March 31.

The two reduced their combined headcount by 12,000 and closed down 650 branches.

Similarly, Max New York Life and Tata AIG Life reported profit for the first time, while HDFC [ Get Quote ] Life and Reliance [ Get Quote ] Life reduced operating losses significantly.

The insurers said the number of people who lost their jobs was negligible and the reduction in headcount was mainly due to freeze on hiring and attrition. However, analysts said the number of people who lost their jobs was substantial.

The insurers said they had to sacrifice growth to achieve profitability and had no option but to improve "efficiency by optimally" using the resources.

Last September, the Insurance Regulatory and Development Authority (Irda) capped commissions and other charges on unit-linked products. It also increased the lock-in period for such products from three years to five years.

This resulted in a sharp fall in sales of unit-linked plans, which accounted for more than 90 per cent sales of life insurance companies. Judhajit Das, chief, human resources, ICICI Prudential Life Insurance, said the company had to shift to new products due to these changes.

"The entire frontline had to be trained. So, we did not hire for some time last year. With natural attrition, the number of employees fell," he said.

ICICI Pru, however, is hiring again and will recruit 1,500-2,000 people a month for the next few months.

"Taking the attrition rate into account, we would like to maintain an average headcount of 14,000 throughout the year," he said.

Most major private sector players such as Max New York Life, HDFC Life, Reliance Life, Tata AIG have also seen a significant drop in employee numbers. Only SBI [ Get Quote ] Life went against the tide and opened 135 new branches, which led to an increase in staff strength to 7,298 from 5,985 a year ago.

The second-largest private life insurer also reported a higher net profit of Rs 366 crore (Rs 3.66 billion) in 2010-11 as against Rs 276 crore (Rs 2.76 billion) in the corresponding period a year ago.

Other companies' officials said natural attrition was behind the fall in employee numbers, adding, industry was going through a consolidation phase after September 2010, when the new norms were introduced.

"We are reworking our business model to suit the regulations which came into force in September 2010. As part of this strategy, we did not fill all the positions which became vacant mostly due to natural attrition," said Vijay Sinha, senior vice-president Tata AIG Life, which reduced the employee strength by 2,700.

Rajiv Burman, senior director & chief people officer, Max New York Life Insurance, said in view of the changed business environment, the company realigned investments in distribution and consolidated its service models to drive process efficiencies while ensuring the same quality of service to policyholders and agent advisors.

"We rationalised our presence in certain geographies, which resulted in some human impact also. We ensured the impact was minimised by transferring employees, filling open roles internally and finding alternative roles wherever possible".

In 2010-11, private insurers posted a marginal 2.55 per cent increase in premium income to Rs 39,381.30 crore compared to Rs 38,399.33 crore in the corresponding period last year. In the period, the industry recorded 15 per cent growth from writing new policies.