MANAGEMENT DISCUSSION AND ANALYSIS

Mr. Rajesh Sud

Executive Vice Chairman and Managing Director

Mr. Aalok Bhan

Director & Chief Distribution Officer

Mr. Amitabh Lal Das

Director & Head - Legal, Compliance & Regulatory Affairs

Mr. Jose C. John

Director & Appointed Actuary

Mr. Manik Nangia

Director- Marketing & Chief Digital Officer

Mr. Mihir Vora

Director & Chief Investment Officer

Mr. Prashant Tripathy

Senior Director & Chief Financial Officer

Mr. Shailesh Singh

Director and Chief People Officer

Mr. V. Viswanand

Senior Director & Chief Operations Officer

LIFE INSURANCE INDUSTRY – LEVERAGING SHIFT TO FINANCIAL SAVINGS

The Financial Year 2017-18 (FY 2018) was a year to celebrate when Indian life insurance industry witnessed another year of 20+% growth in new business. The significant growth for the second year in a row strengthened the belief that consumer confidence in financial savings is sustainable and life insurance industry is well placed to cement its eminent position in the customers’ financial plan.

Individual New Business (Adjusted First Year Premium) for the Indian life insurance industry recorded 19% growth in FY 2018. Both LIC and a large number of private life insurers recorded double digit growth on this vector. The market share of private life insurers increased to 56.2%.

The industry also witnessed two more private life insurers coming up with an Initial Public Offering and now investors have an opportunity to participate in the success story of top 4 private life insurers through stock markets. Many M&A opportunities also opened up in the sector and are likely to reshape the industry structure going forward. The Indian life insurance industry is clearly demonstrating signs of maturing into the next phase of sustained growth.

REGULATORY UPDATE

IRDAI (Insurance Web Aggregators) Regulations, 2017

In April 2017, these regulations were brought in with an objective to supervise and monitor Web Aggregators as an insurance intermediary. The regulations revised the eligibility conditions including change in capital requirements, net worth, etc. New detailed requirements related to operational matters were also introduced. Web Aggregators were allowed to receive remuneration for leads converted into sale of insurance policies along with receiving rewards in case of products sold with zero commission.

Max Life Insurance recorded another year of strong all-round performance in FY 2018

Max Life Insurance recorded another year of strong all-round performance in FY 2018

MOF Circular regarding transfer of unclaimed amounts into the Senior Citizens Welfare Fund (SCWF)

Government of India has established Senior Citizens Welfare Fund for promoting the welfare of senior citizens. Unclaimed amounts after a specified period needs to be transferred to this fund by 1st March every year in the prescribed manner. Insurers to contact account holders as per the specified procedure.

Prevention of Money Laundering (Maintenance of Records) Second Amendment – MOF Notification, IRDAI Circulars and subsequent Supreme Court Order

The Central Government in consultation with the Reserve Bank of India made amendments to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 to incorporate mandatory requirements of Aadhaar and PAN for the KYC purpose. In line with this change, requirements of obtaining Aadhaar & PAN from all customers was made mandatory along with mandatory authentication/validation of the information provided, using authentication facility provided by UIDAI. However, as per Supreme Court order dated 13th March 2018 and IRDAI Circular dated 3rd April 2018, the requirement of collecting Aadhaar from existing customers has been deferred till final SC order.

IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017

To ensure that insurers follow prudent practices on management of risks arising out of outsourcing, prevent negative systemic impact and to protect the interests of policyholders, IRDAI came up with IRDAI (Outsourcing of Activities by Indian Insurers) Regulations, 2017 in April 2017. Outsourcing definition was amended to exclude services which were normally not-carried in-house such as legal services, banking, courier, medical examination, forensic analysis. Bank reconciliation and market conduct issues can now be outsourced. New requirement like Outsourcing Committee, material outsourcing arrangements, maintenance of outsourcing records etc. were introduced. Requirements related to reporting related to outsourcing were also modified.

IRDAI (Protection of Policyholder’s Interests) Regulations, 2017

To protect interests of insurance policyholders and that the insurers, distribution channels and other regulated entities fulfil their obligations towards policyholders and have in place standard procedures and best practices in sales and service of insurance policies, IRDAI introduced (Protection of Policyholder's Interests) Regulations, 2017. New requirements like Board policy on PPHI, display the terms and conditions of products, service parameters and turnaround times on the website, grievance procedure etc. were introduced through this regulation. Policy servicing and claim-related TATs were also modified.

Compliance on Guidelines related to Information and Cyber Security

In the wake of recent cyber-attacks and also to implement appropriate mechanism to mitigate cyber risks, IRDAI came out with a comprehensive cyber security framework for the insurance sector of India. Mandatory appointment of Chief Information Security Officer (CISO) is now required, who is responsible for articulating and enforcing the policies to protect their information assets and formation of Information Security Committee (ISC).

IRDAI Appointed Actuary Regulations, 2017

Modification proposed in the eligibility requirements and duties and responsibilities of an Appointed Actuary. Opportunity given to the insurer unable to appoint an Appointed Actuary to approach the Authority for relaxation of conditions. Restriction on insurer to carry on insurance/reinsurance business without an appointed actuary for a period exceeding one year. Any non-compliance in this regard shall attract appropriate actions under the relevant provisions of the Insurance Act, 1938.

MAX LIFE INSURANCE IN FY 2018 – ANOTHER YEAR OF SUPERIOR PERFORMANCE

  • Total revenue (Gross Written Premium + Investment Income) crossed ₹ 15,000-crore mark

    • Gross Written Premium at ₹ 12,501 crore recorded a growth of 16%,

    • First Year Premium at ₹ 4,349 crore grew by 19%, and

    • Renewal Premium grew by 15% to ₹ 8,152 crore,

    • In terms of Individual Adjusted First Year Premium, Max Life Insurance recorded a growth of 22% to ₹ 3,215 crore.

  • Assets Under Management crossed ₹ 50,000-crore mark to ₹ 52,237 crore recording a growth of 18%

  • Sum Assured in Force crossed ₹ 5-lakh crore mark – ₹ 5,11,541 crore; growth of 35%

  • Shareholders’ Profit After Tax in FY 2018 stood at ₹ 528 crore

Gross Written Premium (₹ Crore)

Assets Under Management (₹ Crore)

Cost to Gross Premium Ratio (%)

Sum Assured in Force (₹ Crore)

No. of In-Force Policies (# in ‘000)

No. of Agent Advisors (#)

Customer Retention (%)

Claims Settlement Ratio (%)

Grievance Incidence Rate (per 10,000)

Policyholder Bonus (₹ Crore)

Max Life Online Term Plan Plus, UIN - 104N092V03. A Non-Linked Non-Participating Term Insurance Plan. LIFE INSURANCE COVERAGE IS AVAILABLE IN THIS PRODUCT. The first five benefits listed above can be availed by paying additional premium. *Accelerated payout in case diagnosed with any one of the 40 critical illnesses. Max Life Insurance Company Limited is a Joint Venture between Max Financial Services Limited and Mitsui Sumitomo Insurance Co. Ltd. Max Life Insurance Co. Ltd., 11th Floor, DLF Square Building, Jacaranda Marg, DLF City Phase II, Gurugram - 122002 (Haryana). For more details on risk factors, Terms and Conditions, please read the prospectus carefully available on www.maxlifeinsurance.com before concluding a sale. You may be entitled to certain applicable tax benefits on your premiums and policy benefits. Please note all the tax benefits are subject to tax laws prevailing at the time of payment of premium or receipt of benefits by you. Tax benefits are subject to changes in tax laws. Insurance is the subject matter of solicitation. Trade logos displayed belong to Max Financial Services Limited and Mitsui Sumitomo Insurance Co. Ltd. respectively and are used by Max Life Insurance Co. Ltd. under a license. Contact Toll Free No. 1800 200 3383. ARN: Max Life/Ideas/Annual Report/OTPP/July 2018

IRDAI Regn. No. 104

BEWARE OF SPURIOUS/FRAUD PHONE CALLS!
  • IRDAI is not involved in activities like selling insurance policies, announcing bonus or investment of premium

  • Public receiving such phone calls are requested to lodge a police complaint

Particulars Financial Year 2018 (April 2017 – March 2018) Financial Year 2017 (April 2016 – March 2017) Growth %
Financial Performance
New Business Premium (First Year Premium and Single Premium) 4,349 3,666 19
Adjusted Individual First Year Premium* 3,215 2,639 22
Renewal Premium 8,152 7,114 15
Commission Expenses 893 936 -5
Operating Expenses (Policyholders’) 1,610 1,591 1
Shareholders Profit / (Loss) After Tax 528 660 -20
Key Business Parameters
Solvency Ratio 275% 309% -34%
Share Capital including Reserves and Surplus 2,689 2,506 7
Assets Under Management 52,237 44,370 18
Sum Assured In-Force 5,11,541 3,77,572 35
Market Consistent Embedded Value 7,509 6,590 14
Return on Embedded Value 20.6% 19.9% 70 bps
Customer Parameters
Conservation Ratio (%) 89.6 88.6 100 bps
13th Month Persistency (%) 82.3 80.4 190 bps
61st Month Persistency (%) 54 53 100 bps
Claim Paid Ratio (%) 98.3 97.8 45 bps

*Individual Regular First Year Premium plus 10% of Single Premium

MAX LIFE INSURANCE – STRATEGY FOR CONSISTENT AND PROFITABLE GROWTH

Strategy of any successful organisation is rooted in the environment it operates in. Indian Life Insurance is operating in a dynamic environment impacted by multiple factors such as local economic growth, growing urbanisation, increasing longevity and digital revolution. India is witnessing a significant change with a stable political environment, government policies having clear economic agenda and focus on promoting the habit of financial savings. In addition, Indian consumer is changing – living in the present, carrying positive expectations of the future but at the same time having to fend for their own financial future and hence wanting their money to work harder to provide them financial freedom and to protect it. With this backdrop, Max Life Insurance created its five-pillar strategy for FY 2017-18.

  • Strengthening proprietary channels

    Max Life Insurance has a balanced multi-channel distribution architecture. Proprietary channels, which include Agency, Customer Advisory Team and e-Commerce, form core of this distribution architecture. The Company decided to further strengthen these channels and invest in their expansion while continuing to be a leader on quality parameters.

  • Stronger integration with bancassurance partners

    Max Life Insurance enjoys long-standing and most productive relationships with its bancassurance partners. The focus on strengthening relationship with Axis Bank, Yes Bank and Lakshmi Vilas Bank by integrating systems, better customer understanding and relevant solutions became even more critical in an open architecture environment.

  • Reinforcing our digital and e-commerce offering

    Indian consumers are adopting digital technology at a fast pace and mobile internet has completely changed content consumption and information seeking behaviour. This creates a new opening for the life insurance industry. Max Life Insurance decided to strengthen its presence in e-Commerce and at the same time create a digitally-equipped employee and distribution force best suited to leverage the new ecosystem.

  • Enhance protection business

    Protection is core to life insurance business. Max Life Insurance has and will continue to strengthen its protection portfolio and increase the element of protection in all the product solutions.

  • Set industry benchmark on customer and health parameters

    Growth without quality of business is not sustainable. Max Life Insurance has always kept this frame in mind while creating its growth strategy. Leadership on all customer parameters such as persistency, mortality, grievance management, customer engagement and loyalty etc. was identified as key to a sustainable and profitable growth.

Strengthening MULTI-CHANNEL DISTRIBUTION ARCHITECTURE

In a country as diverse as India and with the potential that is unmatched in the world, a multi-channel distribution architecture is essential for any life insurance company. Max Life Insurance realised this early in its journey and created a balanced distribution mix. Over the years, the Company has created one of the most productive agency distribution channels, stable and high-performing third-party distribution relationships as well as leadership in e-Commerce. The Company has also shown the ability to constantly review, learn and upgrade its distribution channels to maintain its leadership in the industry.

Proprietary Distribution Channels

Proprietary distribution channels have been core to the Company’s distribution architecture. Agency Distribution, Customer Advisory Team and e-Commerce witnessed strong growth momentum and, at the same time, further improved the quality of business. The proprietary channels recorded a growth of 16% during the year.

  • Agency Distribution

    Agency Distribution is the largest proprietary channel of Max Life Insurance and is considered the benchmark on quality of people and processes as well as the consultative sales to its customers. As a result, Max Life’s agency distribution has one of the highest office productivity levels in Indian Life Insurance industry. Recruitment of quality agent advisors was the key focus area for the channel during FY 2018 as this is an important vector for building a career agency model. A variety of initiatives yielded good results and helped improve the quality of agent recruitment.

  • Customer Advisory Team

    Max Life Insurance has a strong in-house team that engages with existing customers in select cities. This direct-to-customers channel recorded high growth aided by increase in both productivity and in the number of relationship managers. The channel continues to have 13th month persistency in line with global standards.

  • Online Channel

    During the year, online term sales more than doubled. Max Life further consolidated its market position within the life insurance market place by holding on to its leadership position in term plans and adding savings plans to its portfolio. Almost 15% of Max Life customers came through the online channel. The channel provided 58% of the protection cover (i.e. Total Sum Assured) written by Max Life Insurance in the year.

  • New Channels

    Max Life Insurance has been leading the industry in adoption of the concept of Insurance Marketing Firms (IMFs) right from the time it was introduced. During the year, the company expanded the IMF channel and now has 152 IMFs which account for more than fifty percent of IMFs registered with IRDAI.

Third-Party Distribution

  • Axis Bank

    Max Life’s long-standing relationship with Axis Bank is one of the most successful bancassurance relationships in the Indian life insurance industry with both partners committed to providing superior value to their customers. The company maintained its growth momentum at Axis Bank. Opening of new Bank branches, branch activation and increased preference for ULIPs amongst high ticket customer segment aided the growth in new business.

  • YES Bank

    This relationship continued its strong growth performance during the year and retained its position as one of the fastest growing bancassurance relationships in Indian life insurance sector. Increased focus on affluent customers resulted in greater share of ULIPs in the product mix. The company remained focussed on customer parameters. As a result, 13th month persistency witnessed an increase. The company increased branch activation in YES Bank through a significant increase in their specified persons.

  • Other bancassurance relationships

    Lakshmi Vilas Bank witnessed growth in new business in line with management expectations and the company continued to be the dominant life insurance partner for the Bank even in an open architecture environment. Our UCB partnerships also recorded a healthy growth.

During FY 2018, the company’s renewal premium grew by 15% to ₹ 8,152 crore and Max Life Insurance continued its leadership in conservation ratio at 89.6%.

Group Business

Group business continued to make good progress with a growth in written premium by 15% as it added some leading corporates to its customer base.

CONTINUOUS FOCUS ON OPERATIONAL EFFICIENCY FOR ENHANCING CUSTOMER EXPERIENCE

Customer retention is the best evidence of both selling right product solutions and the quality of service a company provides to its customers, which in turn leads to better customer engagement.

During FY 2018, the company’s renewal premium grew by 15% to ₹ 8,152 crore and Max Life Insurance continued its leadership in conservation ratio at 89.6%. 13th month persistency was 82.3% and recorded an increase of 190 bps over last year. 61st month persistency at 54% recorded a growth of 80 bps over FY 2017.

Management’s focus on reducing customer complaints resulted in a significant reduction on this parameter. After 38% reduction in FY 2017, in FY 2018, the company witnessed 37% reduction in complaints resulting in the Grievance Incidence Rate improving to 95 per 10,000. Max Life’s efforts to educate customers about fraudulent calling mechanism resulted in 17% reduction in spurious call complaints. The Company worked closely with the police to nab such fraudulent callers which resulted in multiple bank accounts of such offenders being frozen. Information security processes were further strengthened during the year.

Payment of death claim is the biggest moment of truth in a life insurance contract. The company is amongst the best in Claims Paid Ratio and continued its leadership journey on that front with Claims Paid Ratio improving to 98.3%. The company paid 10,152 death claims worth ₹ 353 crore during the FY 2017-18. Since inception, Max Life Insurance has paid ₹ 2,223 crore towards death claim to 81,253 families.

Customer Experience Index, a cumulative index of customer experience across key policyholder transactions, witnessed an increase in Top 2 box score to 81% with 5 out of 10 touchpoints having scores of about 80% which is in line with global standard results. In addition, the Customer Confidence Index improved to 80% due to significant increase in Treating Customer Fairly Index to 91%.

PRODUCT MIX – INCREASE IN SHARE OF PROTECTION AND ULIPs

Max Life Insurance has a balanced product portfolio having an optimal mix of traditional endowment plans, unit linked plans and pure protection plans.

During the year, Max Life Insurance added four new products – Max Life Assured Wealth Plan – a guaranteed lump sum maturity benefit with a short premium paying term, Max Life Online Savings Plan – an online unit linked insurance plan with options for wealth creation and planning for children education, Max Life Online Term Plan – a feature rich online term plan and Max Life Point of Sales product – a simple product for the PoS channel.

Protection portfolio is one of the key focus areas for Max Life Insurance. During the year, sales of Online Term Plan doubled with sales through offline channels like CAT, Axis Bank and Agency Distribution also contributing significantly.

COST MANAGEMENT

Operational efficiency is key to reducing cost in the Company. The operating expenses (policyholders) to net premium ratio improved from 14.5% in FY 2017 to 13.0% in FY 2018 and the cost (Commission plus policyholders operating expenses) to net premium ratio improved from 23.7% in FY 2017 to 20.2% in FY 2018.

INVESTMENT PERFORMANCE

The company’s Assets under Management (AUM) of ₹ 52,237 crore recorded a healthy growth of 18% over last year. The returns of Traditional and Unit-Linked funds has been commensurate with the risks assumed in respective funds.

The traditional funds continue to have highest quality credit assets, with over 94.6% of the debt investments in AAA or equivalent instruments. The equity portfolio has close to 83% of exposure to good quality large-cap stocks which are expected to provide superior returns over the long term. From a strategic investments initiative, the company is constantly evaluating ways and means to improve portfolio yield with a non-commensurate increase in risk. Newer asset classes that have been initiated in the past 3 years and are now seeing ramp-up such as Real Estate, AIF investments amongst others.

New investment initiatives during the year were:

  • Investments into InVITs (Infrastructure Investment Trust),

  • Ramp-up of real estate investments,

  • Investment in alternative investment fund (AIF), and

  • Looking for credit opportunity to enhance in yield on the portfolio.

The company adopted the Stewardship Code as prescribed by the IRDAI and the investment team started engaging with managements of investee companies and voting on material proposals to protect our investment portfolio.

POLICYHOLDER BONUS

The Board of Directors took advice from the company’s Appointed Actuary and approved the recommendation to:

  • Increase the FY 2017 regular bonus rates by 5% for all the old products closed to new business

  • Increase the FY 2017 regular bonus rates by 7.5% for four products which are open to new business - Life Perfect Partner Super, Life Gain Premier, Whole Life Super and Future Secure II

  • Maintain the regular bonuses illustrated at 8% investment return for two products which are open to new business – Monthly Income Advantage Plan and Future Genius Education Plan

  • Pay terminal bonuses to maturities and eligible deaths such that the final payouts are aligned to their asset shares

The total cost of regular bonus payable for the next 12 months is estimated to be ₹ 1,084 crore, an increase of ₹ 230 crore from the bonus distributed last year amounting to ₹ 854 crore. In addition, the payment of terminal bonus on eligible deaths and maturities has been approved, the cost of which would be ₹ 12 crore.

INFORMATION TECHNOLOGY – LEVERAGING TECHNOLOGY FOR BUSINESS TRANSFORMATION

During FY 2018, significant technological interventions were undertaken by Max Life Insurance with an aim to transform business outcomes. A complete revamp of the Max Life Insurance Corporate website and customer servicing, enabled with world-class user experience (UX), mobile responsiveness and powered with latest technologies, has helped substantially increase the B2C revenue through online route. Max Life Insurance also launched smart BOTs for superior customer experience and real-time business metrics accessible “Anytime, Anywhere and on the go”. Other key applications launched included a unified system for enhanced experience in Operations (UNO) and mPower - a mobile responsive one-stop shop mobile application for empowering Agents and Relationship Associates for customer and self-servicing.

ENHANCED ENGAGEMENT WITH EMPLOYEES

At Max Life Insurance, improving employee experience and people practices is the bedrock of the company's high-performance culture. Throughout the year, initiatives on supporting performance, celebration of personal and professional milestones and volunteering for social impact were planned at local and organisation level. Continuous listening and acting on feedback are enabled through an annual employee engagement survey in partnership with IBM Kenexa, annual Great Place to Work Study and Internal Pulse surveys.

FY 2018 study by Great Place to Work Institute, India recognises Max Life amongst top 15 workplaces in the BFSI category. Max Life is the only life insurance company to be part of this list. Overall, Max Life Insurance is ranked 43rd in the Great Places to Work in India in FY 2018.

94% employees participated in the recent annual engagement survey conducted in Quarter 4, FY 2018. IBM has reported Max Life engagement levels amongst top decile of its global client database.

Digitisation of HR processes is key to offering convenience to our employees who are spread across 300+ locations in India. Employee App has now become the lifeline for our employees through which they can complete transactions like attendance management, salary slip request, create and participate in polls for better listening etc. In addition, through eCube, our employee portal, the company is able to communicate and engage with all its employees.

Pehal, an employees’ volunteering programme, gained further momentum during the year. Around 3,500 employees and almost all agency distribution offices participated in various social causes such as financial literacy for underprivileged students via school contact programme, green plantation drive, healthcare activities such as blood donation, immunisation and health camps and collection and distribution of goods for underprivileged section of the society.

At our Founders’ Day, 271 employees and their families were recognised with Long Service Awards for completing 10 and 15 years of service.

STRENGTHENING THE MAX LIFE BRAND

"Do kadam aage" or always ahead of the challenges in life by protecting your financial future campaign was on television twice in the year. This campaign supported by online and social presence resulted in stronger brand association with protection. The campaign also helped open more doors for our offline sellers.

During the year, the Marketing function carried out a few experiments to support business objectives. A radio campaign in Mumbai and Delhi had a compelling narrative for daily commuters and clearly articulated the need for protection connecting it with the real-life situations on road. The company for the first time sponsored a Marathon in Bengaluru which received very good response and helped the brand build a connect with a health and wellness platform.

The Max Life Actuarial Team at an employee training event

The Max Life Actuarial Team at an employee training event

GENERATING INSURANCE AWARENESS AMONGST CUSTOMERS

Max Life Insurance continued to work towards increasing awareness about life insurance and financial concepts amongst its existing customers and prospective life insurance customers. In line with the IRDAI focus, the company worked on four specific themes:

  • Campaign on the benefits of life insurance

    Max Life Insurance has engaged with its existing and prospective customers through its social media assets like Facebook and Twitter to enhance their understanding about the true role life insurance can play in meeting their needs. During FY 2018, the company carried out two television campaigns and a radio campaign to educate consumers about the need for protection against unforeseen events of life. Throughout the year, the company worked towards imparting knowledge to policyholders and prospects through authored articles in national and regional dailies, knowledge articles through own website, social media assets and direct electronic mailers. As a special initiative, during the last quarter of the year, the company distributed handouts on ‘Myth buster on Taxation’ and ‘Tax Calculator’. Sellers were empowered with leaflets on lifestyle changes which was shared with existing and prospective customers who walked into our offices during ‘World Cancer Day’. Physical electronic posters were displayed in the company’s own offices and offices of distribution partners giving information about how life insurance can play an important role at various life stages.

  • Campaign focussing on protection of consumers

    Fraudulent activities and spurious calling to fleece genuine life insurance consumers of their hard earned money is a big challenge for the life insurance industry. There is a need to make concerted efforts to overcome this menace. Max Life Insurance made its contribution by educating consumers about such activities through videos which were posted on Social media assets and were sent to existing customer base. In addition, Max Life Insurance also took legal measures to take action against unscrupulous elements who are engaged in such activities.

  • Campaign for children and youth

    Max Life Insurance launched a special campaign of teaching the youth of India about the basic financial concepts. We believe that if they are introduced to financial planning early in their life, these people will be in a better position to implement these concepts in real life to their benefit. Max Life Insurance employees educated ~6,000 students of 56 schools in Gurugram, Jammu, Gwalior, Hyderabad, Vadodara, Rourkela and Guwahati. This campaign was extremely successful as students actively participated in these financial literacy class. They were also provided with reference books on financial literacy. Information about Government promoted financial schemes so that the students could share those with their parents which could benefit the household.

  • Campaign for the underprivileged and rural and socially backward

    Max Life Insurance adopted Dhakrani village in Uttarakhand in 2015. Our employees and agent advisors have been carrying out door-to-door financial literacy campaign in the village. During the year, our employees reached out to 995 households – conducted financial needs analysis and educated them about the financial products suitable for their identified needs. Efforts were made to encourage them to invest small amounts in government initiatives such as Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Suraksha Bima Yojna, Atal Pension Yojna etc.

A ROBUST RISK MANAGEMENT FRAMEWORK TO ADDRESS ENTERPRISE-WIDE RISKS

Your Company’s overall approach to managing risk is based on the ‘three lines of defence’ model with a clear segregation of roles and responsibilities for all the lines. Business Managers are part of the first line of defence and have the responsibility to evaluate their risk environment and put in place appropriate controls to mitigate such risks or avoid them. The Risk Management Function, along with the Compliance Function, form the second line of defence. The Internal Audit Function guided by the Audit Committee is the third line of defence and provides an independent assurance to the Board. The Statutory Auditors and regulatory oversight aided by the Appointed Actuary in his/her fiduciary capacity is also construed to provide an additional third line of defence.

Max Life launched a special campaign targeted at the youth

Max Life launched a special campaign targeted at the youth

Risk management activities are supervised on behalf of the Board by the Risk, Ethics and Asset Liability Management Committee, whose responsibilities conform to those prescribed by the IRDAI. The Management Risk Committee chaired by the Executive Vice Chairman and Managing Director and supported by the Operational Risk Group, and Asset Liability Management Group, Information Security & Business Continuity Management Committee and the Outsourcing Committee, assist the Board Committee in overseeing the risk management activities across the Company.

Your Company has an operationally independent Risk Management Function in place, headed by a Chief Risk Officer. The function is responsible for the supervision of all risk management activities in the Company, including developing the risk appetite, maintaining an aggregated risk view across the Company, monitoring the residual risks to ensure that they remain within tolerance levels. It also reviews the appropriateness and adequacy of the risk management strategy and develops recommendations to the REALM Committee as necessary. The Risk Management function also ensures that, through various management submissions, the Board is adequately informed on key emerging risk related issues and if necessary, provides supplementary advice to the Board through REALM Committee.

Your Company has in place a Risk Management Policy which lays down the broad contours of management system in place which is used to identify, assess, monitor, review, control, report risks and controls within the Company. It is also the Company’s policy that risks should be managed systematically with the process of risk management being well defined and with its various elements properly integrated. The implementation of risk management system is a continuous cycle of improvement over the Company’s existing risk management elements. Your Company is progressing well on its vision of a matured state of risk culture where every individual takes responsibility of risks and has a thorough understanding of all risk tolerances.

Your Company has in place a risk management system that enables it to develop and implement strategies, policies, procedures and controls to manage different types of risks., A Risk Appetite Statement is in place which identifies and addresses each material risk to which the Company is exposed and establishes the degree of risk that the Company is willing to accept in pursuit of its strategic objectives, business plans and the interest of the policyholders. These material risks have been categorised in the areas of Strategic, Insurance, Investment and Operational Risks. The Risk Management Strategy has been developed which defines the Company’s approach to manage the identified material risks through acceptance, avoidance, transfer and/or mitigation. The degree and intensity of the management action is guided by comparing the risk appetite with the potential impact of the risk, likelihood of its occurrence and the costs of implementing the controls. This is supplemented by various policies and procedures in respective operating areas which help to identify, mitigate and monitor risks.

The risk management framework also ensures that the level of risk accepted is within the Company’s risk capacity and the level of capital adequacy is in excess of the level prescribed in the regulations.

REPORT ON MARKET CONSISTENT EMBEDDED VALUE

Keeping in view the requirements of long-term investors, the company has been reporting the Embedded Value (EV) for the past several years. The EV of the Company, as at 31st March 2018, stood at ₹ 7,706 crore. Post payment of final proposed shareholder dividend of ₹ 197 crore, which will be accounted post 31st March 2018, the closing EV will be ₹ 7,509 crore.

The EV is a measure of the shareholder value arising from the in-force policies and the net worth of the company as at the valuation date. The company uses a market consistent methodology approach as this approach better reflects the value of an insurance company by explicitly allowing for insurance and economic risks rather than using implicit overall allowance for risks through Risk Discount Rate in the traditional approach.

Market Consistent Embedded Value (MCEV) method

The EV of the Company is calculated keeping in view the MCEV principles issued by the Stichting CFO Forum Foundation and the Actuarial Practice Standard 10 as issued by the Institute of Actuaries of India. However, the methodology and results are not intended to be compliant with these standards.

In MCEV, an explicit allowance for the risks is made through the estimation of the Time Value of Financial Options and Guarantees (TVFOG), Cost of Residual Non-Hedgeable Risks (CRNHR) and Frictional Cost (FC).

Note: The deductions for risks to arrive at the VIF represent a reduction of ~14% in the PVFP, in line with last year’s reduction. The largest deduction is in respect of CRNHR.

  • Operating return on EV of 20.6% is mainly driven by new business growth and unwind of discounting

  • Operating variance mainly constitutes the positive impact of mortality and persistency experience variance and modelling enhancements

  • Non-operating variances are mainly driven by equity and interest rate movements since March 2017

  • The interim shareholder dividend of ₹ 196 crore has been paid during the year and a final dividend of ₹ 197 crore will be accounted post 31st March 2018. Post the payment of the final dividend, the closing EV will be ₹ 7,509 crore

Value of New Business (VNB)

The VNB represents the value added to the EV due to the new business written by the Company during the year. For FY 2018, the VNB was ₹ 656 crore, calculated at actual costs, resulting into new business margin of 20.2%.

WAY FORWARD / OUTLOOK

With increasing focus on digitisation and formalisation of the economy, there is a growing market for financial savings products. In addition, the demand for life and health protection is also increasing. This creates new growth opportunities for the Indian life insurance sector which has recorded close to 20% growth per annum over the last two financial years.

Max Life Insurance is well placed to leverage this opportunity through its multi-channel distribution and a comprehensive offering of products. To further strengthen its distribution architecture, Max Life Insurance is committed to expand the geographical footprint of agency distribution, further strengthen its e-commerce and direct distribution (Customer Advisory Team) channels and drive growth through new distribution channels such as Insurance Marketing Firms. The company has already initiated implementation of these expansion programmes. At the same time, the company will further strengthen its existing bancassurance relationships with Axis Bank, Yes Bank, Lakshmi Vilas Bank and multiple Urban Cooperative Banks. In addition, the company proposes to be an active participant in the open architecture opportunities in bancassurance.

Max Life team winning Gold at the ASQ awards 2018 in Seattle, USA

Max Life team winning Gold at the ASQ awards 2018 in Seattle, USA

Max Life Insurance, known for its customer-centric approach to business, plans to further enhance its engagement with more than 33 lakh existing customers, understand their needs through big data analysis and offer them customised solutions at every stage of their lives. The company plans to increase the share of protection and ULIPs in its product mix, keeping in mind the changing customer requirements. During the FY 2018-19, Max Life Insurance will evaluate some of the industry first ideas including wellness which it plans to integrate with its existing product designs.

To further improve its customer service, Max Life Insurance has created Customer Centre of Excellence (CoE). The Customer CoE will benchmark our customer service practices with best-in-class global practices, learn from customer service practices across industries and improve our service standards.

Digitisation will continue to be a key focus area for the company with focus on Employee, Customer and Distribution digital. The company aims to create a paperless and mobile first ecosystem to provide frictionless processes. Digitisation is one of the key agenda for Max Life Insurance in the process of creating an efficient and quality organisation.

During FY 2019, the company will continue on its profitable growth path and aim to outperform private life insurance industry in business growth, set new benchmarks in customer-centricity and achieve new milestones in our great workplace journey.