Do you feel your unflinching bancassurance conviction has kept you in good stead, at a time when most insurers have gone the ULIP way?
I will answer this question in two parts. On the Bancassurance channel, established infrastructure and loyal customer base obviously make it a preferred choice of life insurance companies. In our case, being a joint venture of two prominent banks ‐ IDBI Bank and Federal Bank ‐ and Ageas, we had ample room for growth amid high competition and our performance bears testimony. We were among the few life insurance companies to break even in a mere five years of operations. Our gross written premium (GWP) has almost doubled in the last three years. In fact, for the quarter ending June FY18, we recorded a 65 per cent year‐on‐ year increase in new business premium (NBP) in the individual insurance segment.
Talking about ULIPs, we truly believe that it’s a great product in its current avatar. However, customers yet lack a good understanding of the ULIP nitty gritty. There have been instances when they came back with grievances. We don’t intend to chase ULIPs at the cost of jeopardizing our bancassurance relationship and hence, we prefer to sell them to discerning customers who understand the product well and are not swayed by transient market volatility. During Q1 FY 18 ULIPs comprised 17% of our total New Business Premium.
Does the cocoon of high persistence, low-cost banca channel unknowingly restrict the scope for growing the digital and agency channels?
High persistency and Banca channel are our strategic growth drivers, not really a cocoon limiting our creative thinking. We continue to leverage other growth channels. We have a growing digital channel and an agency channel, both of which we are nurturing in a calibrated and profitable manner. Besides, we also have other channels like Group, Broking and NR, and we were one of the earliest entrants into the newly introduced POS channel. We are also on the lookout for new bancassurance tie ups to strengthen our distribution.
Do you expect the online route to fetch better outcomes in the time to come, more so if customers demand simple, transparent and fast interactions?
Life insurance is essentially a push product, requiring a face‐to‐face interaction. Products require long‐term commitment and hence assistance from some expert acts like an assurance for the buyer. I don’t see human intervention and dependency reducing immediately, unless AI or any other technological innovation suddenly transforms the purchase experience. Having said that, there’s great potential for simpler and pure term products in the online space. This is because of the increasing awareness about the need to safeguard the financial future of one’s loved ones as also the low‐cost awareness surrounding online products. I strongly feel there’s immense scope for product innovation through digital.
How is IDBI Federal Insurance placed on the tech innovation front?
For us technology is driven by purpose. Being a medium‐sized company, it is pertinent we drive tech innovation only after thorough evaluation. To avoid needless rollout delays, we have a dedicated team focused on ushering in new ideas and innovation. However, every implementation is subject to scrupulous evaluation.
This year we have launched two new IT initiatives. The first is our mobility platform whereby we have developed a tablet application to enable our sales teams in selling our products on the digital platform. We have named this “On the Go” keeping in mind the real benefit it brings to the salespeople and their customers. We have conducted a pilot of this tablet‐based sales model and the results are very encouraging. Interestingly, our late entry into this platform helped us learn from others which in turn helped us launch it in record time. Where other companies have spent years in solution development, we launched the pilot in just 7 months. We shall go live with 100 users in Banca and gradually cover the entire sales force.
The second initiative is the new IDBI Federal website. Our new website is built for the digital consumer and addresses all kinds of visitors – explorers, buyers and on‐boarded customers. The new front end (that the customers see) is supported by a completely new backend. Not only is the look and feel new‐age, the engine driving it is also state‐of‐the‐art technology, developed keeping the future in mind. Besides these, we have also implemented a Workflow Management System which has reduced our turnaround time for issuance by 75%.
What are your thoughts on the fate of open architecture in India?
Open architecture has not really taken off in India. To me, bancassurance is more about getting deep rather than going wide. Banks have their own products too; life insurance is not their core offering. So, it requires lot of time and effort to egg them on to sell life insurance products. It is essential for a bank to tie up with an insurance company with which it has strategic and cultural alignment, and build on the relationship thereafter.
What’s the biggest distribution-related challenge in your reckoning?
The biggest distribution challenge for IDBI Federal is how to enhance the productivity of existing distribution network. As I mentioned earlier, though bancassurance is the largest contributor to our business, we are still scratching the surface. To realise the full potential of this channel as also other channels, it’s imperative to enhance their productivity.
You seem to have steered clear of the Health & Pension space.
There is no plan as of now. Medical costs are increasing and there are good opportunities. But it’s not our playing field as of now. Likewise, we don’t have immediate plans to go deeper in rural areas.
What was the underlying thought behind your claims guarantee scheme? How has it fared?
One of the biggest challenges that the industry faces is how to woo the customer back. For the customer, the most critical part of their relationship with their insurer is at the point of making a claim. Through our claims guarantee scheme, we aimed to settle claims in just eight working days. In case we fail, we would pay an interest of eight per cent per annum on the death claim amount for each day of delay beyond eight working days. We have not had to pay a single penny as interest since the launch of this initiative in 2014. On its positive impact on the brand, IDBI Federal was declared one of top ten most trusted life insurance companies of India as per Economic Times Brand Equity Survey.
How do you see life insurance products evolving over time? How disruptive would the waves of Big data, Machine learning, IoT and value-added analytics prove for the sector?
Digital is not just the purview of the handful of people in the digital team. It is a culture that needs to be spread across the organisation. We may introduce many initiatives in the ‘digital’ space but very few would succeed unless we have digital embedded within the organisation’s culture.
Digital and technology are double edged swords. With every step in the positive direction, there is a potential downside that you need to shield yourself against. In the case of IT, the downside comes in the form of cyber risk and the threat on data security. One, therefore, must tread the digital path with care and after thorough evaluation. It’s not an ‘either or’ business case, a careful balance needs to be maintained.
What’s also important in the race to get more tech oriented and digitally savvy is the relentless focus on the consumer. Else, a business may get overawed by technology and could adopt it without a strong consumer benefit attached to it. We are wary of this and always keep the consumer filter on while evaluating tech.
Where do you see IDBI Federal in three years from now, vis-a-vis competition from public and private players?
Nobody can predict what the future holds despite having ambitious growth plans for the company. Our gross written premium (GWP) has almost doubled in the last 3 years. In 2013‐14 our Total Premium was Rs. 826 crore, and in 2016‐17 we closed the year at Rs. 1565 crore. Two years ago, this seemed impossible, but we did it. Our basic goal is to keep performing better than the industry average.
Do you expect steady growth both in NBPs and Renewals going forward or would it be skewed in favour of one of these?
NBP grows faster than renewals in early years but as a company gets tenured, the renewal growth becomes significant. Our persistency across buckets is one of our strengths. Our surrender ratio is also one of the lowest. We have an equal focus on new business and the business staying in our books.
What are your views on the possibility of consolidation in your sector in the coming time? What's your take on the inorganic route to growth?
Consolidation and listing are the new normal for the insurance industry. Speaking of inorganic growth, we have no plans as of now. Our immediate priority is to fortify Banca, re‐energize Agency as well as incubate new channels. We are unflinchingly focused on profitable, all‐round growth and value addition for our shareholders, customers and employees.