Naveen Tahilyani, MD & CEO, Tata Aia, On The Transformation Of Tata Aia With A Focus On The People And Team Building Aspects.
This journey at Tata AIA is very much a work in progress. It is not that we have reached the destination, there is always that danger where when you achieve something you think that you have reached the final destination. Secondly, when you tell the story the mind tends to romanticise some aspects and put it in a neat flow that this happened first, and this happened second where you are almost like reading a well-scripted novel. So, while my presentation may convey that sense, the reality is that we muddled our way through it. We got a few things right, which is why we did well, but we did many things wrong as well which is why, in hindsight, there are many things that we could have done differently. So, I’ll be happy to share some of those thoughts as well. With those caveats I’ll start my presentation.
The journey so far – we are the progeny of two very mighty shareholders, TATA group, which needs no introduction in India and all I can say is that there is a very strong desire in Tata Group that we make a mark in the financial services as well in addition to everything else that the group does. AIA, which owns 49% of our company, was born out of AIG in 2010 and AIG had to pay USD 50 billion debt to the US treasury. One of the ways to manage that was to spin-off AIA with a USD 29 billion IPO in 2010 and that USD 29 billion IPO is today worth USD 170 billion, six times in the last 10-11 years, to a point that AIA is by far the largest insurance in the world by market cap. AIA is only in life insurance and only in Asia so we could have not asked for better share-holders than the TATA group, it has a brand promise in India that is unparalleled. And AIA with its expertise focusses on Asia and life insurance provides a solid business management support and guidance.
Our company was incorporated in 2001, from then till 2012 we had some growth and TATA AIA was number 8. There are a number of reasons because of which we had a terrible phase, a contraction phase from 2010 to 2015 when we went from number 8 to 17 and not only that we lost our top-line from Rs 1000 crores plus which was a respectable number down to Rs 234 crores in 2015. From 2015 we have been on a journey in rebuilding the company, transforming the company and we have been lucky to get back to number 5 and we reached this position somewhere close to 2018. So, in three and half years we got to 5 and our top-line today and business is about Rs. 3.5 thousand crores and our total premium is in excess of Rs 10,000 crores.
What is of immense pride to me is last year, we became number one in the industry, for a couple of years before that we were threatening to be number one, last year we rose to number one. I think we have a built a business which is not just high volume but also high quality. Look at the persistency, that is how many customers renew the policy that they buy with us, our number has increased to 88%. The best in the industry is 89% so, we are not too far away. Our claim settlement ratio is at 98% which is again top 3 in the industry for the last 3-years. Even in Covid, through FY21, we have done quiet well. we have grown last year 27% while the private industry is at 8% so, we have outperformed the industry by about 3.5 times. Including LIC, the industry actually grew by 4% so by that metric we outperformed the industry 7-8 times. One of the things I am happy about is our focus on employee vaccination. We are a very employee-centric company. It is clear to us that whatever we have achieved is backed with hard-work, dedication and loyalty of our employees. We are about 9000 people today as a company and I think it is because of the contribution of these 9000 people that we are where we are and it is also clear that we will get to where we want to get to only with the dedication, hard-work of these 9000 people. So, while there are many things off the stage, I think what is of central importance to me is this. 99% of our employees have taken their first dose and 86% of our employees are eligible for second.
If I step back now and tell you what worked for us through the last six years of our transformation, we went back to the drawing board and recrafted our vision, mission and values. Very often vision, mission and values are things to be put on the screensavers, clocks of boardrooms, put across different types of organisation. The main anchor we have had is these statements and articulating them:
VISION: To be the pre-eminent protection provider – enabling dreams, inspiring healthier and happier lives.
When we put this vision on the ground, in 2015, the life insurance industry was very much a saving source and we kind of said that if we want to rise for number 17 position, we cannot do what the big boys are doing and the big boys that time were same as the big boys today. It was ICICI Prudential, HDFC Life, SBI Life, and we said we are not going to beat these big boys by doing what they do, we are going to do better. So, what can we do better? We said let’s try and pivot the aim to protection. I think that single choice led us to a whole set of innovation and design on creating a process in which we can issue protection policy much quicker than almost anybody else and that has given us a lot of volume and that is why I say becoming number one was extremely important for us. It was a start and I think it did wonders for our brand name. it talked nicely to the Tata Brand because Tata is best known for trust and in protection the main question asked is that when they are not around, will the company be around? I think with TATA and AIA we were able to answer that question.
MISSION: To provide the best and simplest life and health insurance solutions
Again, if I go back to 2015, the life insurance company was more on savings and within savings it was focused on two categories – unit-linked products and power products. It doesn’t matter what they are but the big issue was that the consumers were not clear what they were buying and what returns they would get. So, on one end, while we innovated on protection, at the other end we were the first in the industry to introduce guaranteed plans. We said don’t worry about the market or the participating policies, there is a guaranteed return and coming from the house of TATA, we will stand behind you. Now it was easier to say this than to do this because when you give a guarantee to consumers at a certain interest rate, you need to make sure that you are earning that rate of return to bounce it back to the consumer. We were the first again to work with a couple of foreign banks at that time to create the first derivative instruments in the market which allowed us to do this. It was a great example in my mind of muddling through, you have to be innovative enough to do something that doesn’t exist in India today.
Life insurance at that time and even today to some extent is hit and run. They sell the consumer one policy and then you forget about the consumer. We tried to take this approach as let’s address the needs of the consumer and try and get into the solution sector, offer multiple products and make sure that we understand the needs of the consumers.
VALUES: Consumer Obsession; Passion for Excellence; People our Core We had a lot of debate at that time whether we should have consumer-centric or friendliness instead of obsession, but we said let’s use the word obsession in a positive form. We are focussed on creating measure on each and every tough point that we have with the consumer be it claim request, call centre, service request, etc, how well we are interacting with them. So, it took us a couple of years to get to it but today we can measure the real-time score of what our consumer feels about us and what we can do to improve.
Second is to set high standards, I am trying to illustrate this value into a business model example through what we have done with our agency. We rose to number four last year and it is because we focused on scale as well as productivity of our agents, it was beneficial to us as well as the advisors because they earn a steady income from us and therefore are committed to TATA AIA rather than doing it part time. Again, this is work in progress but the fact that said we will be number one in the industry, and we achieved it after a lot of hard-work is a testimony to staying true to that value.
Last, everything that we have achieved is because of our people. In 2015, when we were on rank 17, good talent deserted us, we had fewer senior people than we needed and we had to find the way to get right talent in but also energise our existing work. So, we spent a lot of time visiting people in our branches, understanding the challenges, explaining the direction and telling them where we were going, listening to them, including the feedback in the strategies. We said we want to be known in the industry for providing best rewards for the best rewards, whether it is promotions, larger roles, recognition at the Tata Group level, AIA level, I think we pulled out all stops to recognise our top 600 people. We spent a lot of energy in initiating a two-way communication. We have an employee engagement score of 91, we were considered best employers for five years in a row. So, ultimately, people are at the core. Our attrition rates are by far the lowest and that is a sign that we are doing a few things right.
As I said, it is a work in progress, and we are continuing to create innovation which is building integrated health and wellness ecosystems. I would put this bluntly, life insurance in India today has a very morbid proposition. I think our proposition to the consumers is that if a mortality event happens or a critical illness event happens, we pay a claim and that is not an energising proposition to engage a consumer. So, I think we are going to innovate in saying how can our consumers live a longer and happier life and that is going to be the crux of our journey for the next five years. I dare say we have under-invested in technology, data, analytics and it is going to be a big area of focus around us. We are investing USD 30 million in technology in a very material manner and I think we will reap the rewards as we go forward.
Lastly, while we have done well with people and on pretty much every metric so far, thanks to our people, we need to innovate for the future through creating an agile organisation. One of the challenges as we have become so large is that we have lost a little bit of our agility. Things which used to take weeks now take months. So, we have got to bring that culture of agility back. We have to have new capabilities linked to our new focus areas of data, analytics and technology and we need to think about how to get these skills in the company. Not just traditional recruiting but working through part-time, consulting and one of the things the pandemic has taught us to do is work from anywhere. So, we are taking advantage of that. So, that is it and like previous years, people are going to be the centre.
Is it the case in India as well that insurance industries are cash-rich so you collect premium up-front then you can deploy it whenever claims are payable, but you still have a positive cash-flow?
By and large, in general insurance, they are very cash-flow positive, they make a lot of money from investment, and they pay claims out of that. But life insurance is a different ball game, we don’t have that advantage. Due to regulation and accounting standards and given our cost of acquisition on an average when we sell a policy, we break even on that policy in about say six or seven years and therefore, from shareholder’s perspective, we are out of the money for six-seven years. We barely break even and whatever the profit the company makes is when people stick on and pay their premium for six-seven years. So, our business has very different dynamics and the source or value creation is not short term, it is very much medium to long term where we have to make sure that not only we are able to sell today but we are able to collect premium and service customers for the next 12-13 years.
If you have to introspect and say something that you think you may have missed in the journey so far?
I think the biggest miss we had was that we were late to invest in technology. In 2018, we had a debate on this front that what is the right time to disrupt ourselves using technology and I think we didn’t have the conviction to invest in it at that time of the curve and when I looked at what the pandemic has done in terms of digital and in terms of way we have used data, I do regret maybe we could have generated that conviction in ourselves in 2018 itself then we would have been in a different place. So, we are correcting as quickly as we can.
The entire thought of someone else gets benefitted after your death is off-putting, so, if you can manage to market that in an innovative way will really have an impact.
I was talking to my regulators today, our proposition is you die, we pay, it is not an exciting proposition. We have been working with a regulator to launch a very innovative proposition. At the same time, we have got Neeraj Chopra as our brand ambassador and it was a very opportunistic as well as thoughtful choice because we are going to pivot quite a bit in terms of branding, and we are going to invest on it as well.
Have you seen any change in performance in the industry during Covid and has there been a mind-change?
Yes, the pandemic has made us all aware of our mortality and in that sense the demand for term insurance and the ability of people to buy term insurance has gone up. We have been benefitted by that. The impact of the pandemic has been that the claims have gone over the roof, and you can imagine none of us had bargained for what we will go through. It has dented the bottom line of insurance very significantly but at the same time it has increased awareness of insurance and growth is still in the industry. Last month we grew 45%, there is a plus and a minus to it but we have not stopped the capital and we are optimistic.
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