Bharti AXA Life Insurance

This marked the beginning of the second phase of our trip. Mumbai, not only famous for its Bollywood (Indian Cinema equivalent of Hollywood) but also has been the financial capital of India.
Having spent the Saturday and Sunday in Bangalore, some of us arrived in Mumbai on Sunday afternoon while others had already arrived and had taken the city tour and were fairly comfortable with the place and the neighborhood. We all assembled in the hotel lobby to board the bus for a short ride. It was then that we realized that the Intercontinental Hotel was walkable from our hotel. More interestingly the ten-minute walk was on the Marine Drive also known as the Queen's Necklace. The meeting with Bharti AXA was in a way different than all the previous ones we had in Bangalore. It was a dinner hosted Mr. Nitin Chopra, CEO of the Bharti-AXA Life Insurance. Appetizers and drinks were being served on the table, while Mr. Chopra presented.

The presentation took us through the evolution of Life Insurance Sector in India. Following are some of the milestones

• 1870 - Establishment of first Indian Life Insurance office - Bombay Mutual Assurance Society

• 1912 ; 1938 - Life Insurance Sector regulated - Indian Life Insurance Companies Act enacted; Insurance Act 1938 passed

• 1956 - Life Insurance Nationalized through Life Insurance Corporation of India Act - LIC becomes a State monopoly

• 2000 - Opening of the Insurance sector for private players. Presently Foreign Direct Investment (FDI) is permitted upto 26 %

• 2005 - 14 companies offering life insurance - one dominant nationalized player and 13 pvt companies

• 2006 - 15 private sector companies - 2 wholly Indian owned.

Bharti AXA Life Insurance is a joint venture between Bharti, one of India’s leading business groups with interests in telecom, agri business and retail, and AXA, world leader in financial protection and wealth management. The joint venture company has a 74% stake from Bharti and 26% stake of AXA Asia Pacific Holdings Ltd (APH).

The company that launched its national operations in December 2006 has over 3000 employees across over 12 states in the country and their business philosophy is built around the promise of making people "Life Confident".

The following quote from their website and other press media did make a connection to what we got as an answer to one of the questions about their expansion strategies and customer acceptance.

"As we expand our presence across the country to cater to your insurance and wealth management needs with our product and service offerings, we continue to bring 'life confidence' to customers spread across India. Whatever your plans in life, you can be confident that Bharti AXA Life will offer the right financial solutions to help you achieve them"

The Bharti group is very popular across the length and breadth of the country as leading cell phone service provider - Airtel and if marketed as Airtel Insurance, people easily recognize the brand name. Also marketing message and bundling could very well be done with the backing of Airtel.

The market as of 2006, is dominated by LIC with 63 % share while ICICI Prudential and Bajaj Allianz are leading private players with market shares of 10.6 % and 7.4 % respectively. Bharti AXA has the challenges of second wave entrant while it has the advantage to learn from the existing players and enjoy the already created insurance awareness.

Some of the interesting facts about Life Insurance Sector in India

1. Contributes 4.1 % of India's GDP
2. Second largest financial service after banking
3. Total number of lives insured and on books as of March 31, 2006 - 198,466,127
4. As of same date above, Rs. 5,496 billion is the total Assets under Management of Life Insurance Corporations
5. A statutory requirement exists to reach rural areas

There are certain restrictions on how the assets are allocated and how the profits are to be shared and this underpins the time to return to profitablity for the private players. 50 % of the assets to be invested in Government Bonds and 15 % in Infrastructure bonds leaving only 35 % for the fund managers to creatively manage. It is typically known to be a 6 year period and with the opening up of this sector only in year 2000, none of the private players are profitable yet. This makes it ever more challenging for Bharti AXA which is the newest player in the market.

- Shesh Vasudevamurthy