Sanjiv Bajaj Confident in Long-Term Growth for India’s Insurance Sector
Sanjiv Bajaj, Chairman and Managing Director of Bajaj Finserv, anticipates robust expansion for India’s insurance sector over the next ten years. He attributes this positive outlook to the country’s relatively low insurance penetration rates coupled with a growing need for financial security among the population.
In an interview with CNBC-TV18, Bajaj expressed his confidence in the sector’s potential. “We have such low penetration levels in India that it doesn’t worry me at all that as Bajaj continues to grow, there will be the opportunity for many more players, because we need so many more Indians to get that security cover….I’m very confident that you will see this in the coming decade, and for low penetration industries like insurance, it’s going to be a great decade ahead for us,” he stated.
Bajaj expects the life and general insurance businesses of Bajaj Finserv to perform at or slightly above the industry average in the coming years. His projections come despite the upcoming conclusion of the company’s long-standing joint venture with Allianz.
Despite the changing partnership landscape, Bajaj reiterated his commitment to the insurance businesses. He affirmed that there would be no leadership changes, ensuring the continuation of stable operations and strategies.
The subsequent excerpts are from the interview:
Q: This 24-year joint venture partnership has come to an end. How prepared are both businesses for this exit at this point in time?
A: This has actually been a great win-win deal for both partners. Both partners have reinforced their strategic intent for India but with different paths… From Bajaj’s point of view, the Bajaj Group reinforces its focus in India on the insurance business. At ₹24,180 crore that we are going to be investing to buy the 26% stake in both our insurance companies, I believe this should be the single largest investment in the insurance space ever in India and one of the largest investments in the financial services space. Once again, this reinforces Bajaj Group’s commitment and belief in the Indian opportunity.
Q: What’s the growth appetite and aspirations for both businesses from here on? It’s been a relatively slower year in comparison to what you’ve historically seen. What’s the expectation and anticipation from here on in terms of growth?
A: The general insurance business is very much an asset-led business, and since we have seen a slowdown in asset purchases, the industry has slowed down to 10-12% growth… On the life insurance side, over the last seven or eight years, Bajaj Allianz Life has significantly outgrown the market with a diverse set of new relationships, innovative distribution models, new products, and a strong balance between top-line and bottom-line growth.
Bajaj further noted the importance of embracing the current period of global uncertainty. He emphasized India’s economic resilience and its ability to maintain a growth rate of 6% or more. Looking ahead, he expressed his conviction that the country could achieve 7-9% growth in the coming decade, particularly highlighting the promising prospects of low-penetration industries like insurance.
Q: Are you going to scout for another partner, whether that is at all something that you would like to even consider at this point in time? Or do you believe that going solo now, after this 24-year arrangement, is the preferred route for you?
A: We are very clear that, given the capabilities that have been built in both our companies, which are now almost 24 years old, both the companies are perfectly capable of going solo effectively.
Q: How do you see the competitive landscape? It seems pretty clear that Allianz is going to be in India, but with whom, we don’t quite know yet. How do you see the competitive landscape emerging post this transaction ending and the possibility of another transaction starting?
A: There are two ways you can look at this. There are 50 insurance companies, so a 51st would be entering what is already a crowded and competitive space…On the other hand, our own long relationship with Allianz tells us that they’re a high-quality company, and we would welcome a strong, measured, and conservative competitor into the market, which could help balance the industry.
Q: You believe that it’s going to be a growth decade ahead for the insurance sector, which continues to be under penetrated, but it’s also happening at a time where the FDI regime for the insurance sector has changed, and ostensibly, that’s the reason I would imagine that Allianz has decided to exit this 24-year partnership, did it eventually boil down to the fact that they wanted majority
A: Very clearly, I think that’s something that you have to ask Allianz and have them answer. But as they have said, India continues to be on the strategic radar for them, and we hear more as they move ahead.
Q: Do you believe that we are likely to see more foreign players looking at the India opportunity, specifically the India insurance opportunity now, with this FDI regime change and 100% FDI now on the table.
A: I think they should, because when you look at again, as I said, the companies in the last 10 years, most of them have stayed small. They are not able to bring in the right amount of capital. They end up then cutting corners to build growth. We need good quality players, because keep in mind, insurance is a long-term business. It’s a business with a very high level of risk. You get your risk assessment right, you can have one large incident in the general insurance space that can wipe out your capital, get you bankrupt.
