 "We're starting a few rural branches, on a pilot, this year: Kotak Life")
Private life insurer Kotak Mahindra Old Mutual Life Insurance is gearing up to re-file products as per new traditional product guidelines, while constantly maintaining new business premium growth. G Murlidhar, Managing Director of Kotak Life explains the growth strategy this fiscal, in an interview with M Saraswathy. Excerpts:
At a time when the industry is seeing de-growth in new premiums, how is it that you and few other players are seeing growth?
Insurers with bank partners have seen some growth. We also have a bank as a partner and promoter, so we are relatively less affected. Nevertheless, Insurance with its protection and long term savings premise is a fundamental product, more so in the Indian context where it fills a crucial social security gap. So the medium to long term opportunity is good for insurance companies.
Last fiscal, the growth in new business premiums was not high. How would the situation be, this fiscal?
Since health is a segment which life insurers are focussing on, would you also turn focus to this segment?
In the first half, our focus will be on aligning products to conform to the new product design guidelines, which come into force in October. In the second half, we will focus on pension plans, health products and annuities.
As per your financials, there has been a constant increase in your IT expenditure. So, will we see more products being available online?
Digital initiatives will have to taken, more from the point of view of improving the quality and ease of the sale process, and information sharing, all crucial aspects for customer delight. IT interventions in both pre-sale and post-sale servicing will play a critical role. It would also improve the product range.
Have you see a shift towards Ulip sales?
Ulip has seen a small shift upwards, especially in the big ticket sizes, but there is still a long way to go. Ulips are very transparent and streamlined, but the uptick has not matched that earnestness. But, Ulips reflect how the market goes. If the market remains flat, it will show on NAVs of unit-linked plans. As more customers appreciate and align to the dynamics of the marketplace, Ulips will find its mark.
But, your funds have performed better than Nifty. That is an advantage.
Yes, we always target an alpha over the Nifty, and, have consistently delivered on that. This value delivery is fast becoming the most important differentiator from a customer perspective and is directly linked to aspects such as persistency and customer stickiness.
In terms of the agency force, what are the plans for expansion?
Our agency force is steadily growing both qualitatively and numerically, and we are attracting good talent. We are also expanding into new regions. That said, there is an optimum efficiency to value ratio to be achieved at every stage of expansion.
At a time when your peers are utilising various channels for micro-insurance, what is the model that you are adopting?
We are going to take a hard look at the products that are being sold in the market and we would also be starting a few dedicated rural branches this year. This is on a pilot. This is because we believe that rural business will have to stand on its own feet and should not be a loss making business. It is possible to do it.
Cost of delivery and rural branches will have to structured differently so that they operate on a lower cost. We will first try it out with a few branches, with a structure. And once it works, we will take it forward. The bank also has some rural branches, which we could take advantage of. We don't just want it to be an obligation, we believe it is a serious business opportunity. But, it may not be possible at current cost and we need to have a breakthrough in costs. I think we will get there. We have also got a senior person to focus on rural business.
At a time when the industry is seeing de-growth in new premiums, how is it that you and few other players are seeing growth?
Insurers with bank partners have seen some growth. We also have a bank as a partner and promoter, so we are relatively less affected. Nevertheless, Insurance with its protection and long term savings premise is a fundamental product, more so in the Indian context where it fills a crucial social security gap. So the medium to long term opportunity is good for insurance companies.
Last fiscal, the growth in new business premiums was not high. How would the situation be, this fiscal?
More From This Section
I will be conservative with regards this year too. It has more to do with the macro-economic environment. The industry will feel the heat. But India remains hugely underinsured and insurance fills a critical gap. So the opportunity is huge, and the future prospects are definitely bright.
Since health is a segment which life insurers are focussing on, would you also turn focus to this segment?
In the first half, our focus will be on aligning products to conform to the new product design guidelines, which come into force in October. In the second half, we will focus on pension plans, health products and annuities.
As per your financials, there has been a constant increase in your IT expenditure. So, will we see more products being available online?
Digital initiatives will have to taken, more from the point of view of improving the quality and ease of the sale process, and information sharing, all crucial aspects for customer delight. IT interventions in both pre-sale and post-sale servicing will play a critical role. It would also improve the product range.
Have you see a shift towards Ulip sales?
Ulip has seen a small shift upwards, especially in the big ticket sizes, but there is still a long way to go. Ulips are very transparent and streamlined, but the uptick has not matched that earnestness. But, Ulips reflect how the market goes. If the market remains flat, it will show on NAVs of unit-linked plans. As more customers appreciate and align to the dynamics of the marketplace, Ulips will find its mark.
But, your funds have performed better than Nifty. That is an advantage.
Yes, we always target an alpha over the Nifty, and, have consistently delivered on that. This value delivery is fast becoming the most important differentiator from a customer perspective and is directly linked to aspects such as persistency and customer stickiness.
In terms of the agency force, what are the plans for expansion?
Our agency force is steadily growing both qualitatively and numerically, and we are attracting good talent. We are also expanding into new regions. That said, there is an optimum efficiency to value ratio to be achieved at every stage of expansion.
At a time when your peers are utilising various channels for micro-insurance, what is the model that you are adopting?
We are going to take a hard look at the products that are being sold in the market and we would also be starting a few dedicated rural branches this year. This is on a pilot. This is because we believe that rural business will have to stand on its own feet and should not be a loss making business. It is possible to do it.
Cost of delivery and rural branches will have to structured differently so that they operate on a lower cost. We will first try it out with a few branches, with a structure. And once it works, we will take it forward. The bank also has some rural branches, which we could take advantage of. We don't just want it to be an obligation, we believe it is a serious business opportunity. But, it may not be possible at current cost and we need to have a breakthrough in costs. I think we will get there. We have also got a senior person to focus on rural business.