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3 thoughts on “It sounds funny, but don’t chase either topline or bottomline in life insurance business

  1. I totally agree with you. However if a company choose to do fund business in ULIPS then profits can be quantified. Take for example if a company is managing a corpus of INR 10000 Crores under ULIP, and the FMC is say 0.25% overall then you are getting a clear profit of INR 25 Crores YoY. Every LI business has profits provided the company looks with a long term view. Few companies in India are highly myopic on the contrary.

    1. Agree with you Sriram completely and that’s the whole point. If you build good AUM, you can manage decent profits with thin margins. But the company should have this strategy in place and work towards it. But some companies are working only for topline and putting long term prospects of this business in trouble.

  2. For any business, profitability comes from 1. Enhancing the investment returns 2. Reducing the expenses.
    This is true for insurance industry as well. Smart investment manager will do the first job within the regulatory boundaries on investments. And smart operational manager will bring the most efficient and less costly operational and processes into the system.
    We need to ask how many companies have achieved the expense efficiency after say 10 years of their operations say. The answer of this question is sitting in the rule 17 d of Insurance Rules 1939 ( Expenses of management of insurance). Whether the insurer is complying with this rule?
    Also, whether insurer is still setting aside reserves for maintainance expense overrun even after 10 years? If the answer to both the above points is ‘yes’ then it is a worrying situation for the insurer and management sholud become actionable and immediately tight the nuts and bolts.
    So in summary, insurer should not chase top line or bottom line directly but should chase customers and offer the solution ( insurance products) as per their needs. Once customer is with you, all the. financial lines (top, middle and bottom) of the insurer will be drawn automatically.

    My above views may not be cent percent valid but I would like to hear your views as well.

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