As the market is moving up, the life insurance industry is expecting a robust growth in premium collections. Two months after taking charge at the country’s largest private sector player in the insurance industry, SBI Life, its Managing Director and Chief Executive Officer MN Rao shares his strategy with Shilpy Sinha and Sidhartha. Excerpts:
What will be your strategy for growth?
SBI Life has an advantage of over 16,000 branches of State Bank of India (SBI) and its associates. We would like our business through bancassurance to grow to 40-45 per cent from the present 30 per cent. The agency contributes 47 per cent, while the remaining channels give the rest of the business. We would like the agency channel to also grow in the same range.
We are looking at a 30 per cent growth in business and 20-25 per cent growth in the new business premium. In 2008-09, we have expanded our branch network from 3,800 to 6,500 and increased our staff strength significantly. We would like to leverage that.
Are you going to focus on tailor-made products for your bancassurance model?
We have tailor-made products for banks. We have a product called Dhanrakhsa, which is doing very good. The focus is going to be cross-selling. It is a cost-effective model.
Have you been able to tap the asset base or the potential of SBI?
In most cases, products are bundled with the package. We have employee-employer policy. SBI offers a bouquet of financial products ranging from life insurance to investment banking. In another three-four months, SBI General will also become operational.
What is the individual business trend? Are investors moving towards unit-linked plans now?
Whenever the market goes up, investors' shift towards unit-liked insurance plans (Ulips). Insurance sales are all about what investors want. At present. Ulips constitute 67 per cent of total sales, while rest is traditional. I presume the mix is perfect. Whether the share of Ulips go up will be dictated by customers’ demand.
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How do you look at the Swarup committee consultation paper?
This particular matter has been debated by various bodies. There has been representation from all parties. It will have an impact on the industry, but we will have to watch how the final recommendations shape up.
What would be the implication of the Direct Tax Code on the insurance industry?
These are welcome steps. There are certain issues and the anxieties are expressed about them. A number of issues will be debated such as what will happen at maturity. I have not formed any opinion on these issues.
Are you working on valuations at the moment?
We are internally doing the valuation exercise based on market-consistent embedded value (MCEV) and our assumptions. We will come out with our valuation after the Insurance Regulatory and Development Authority's (Irda's) guidelines are in place.
Will this lead to listing?
We do not have a timeframe in mind. We are waiting for the amendment in the rules. The decision of listing will depend on the both principals — SBI and BNP Paribas. Anyway, we are profitable and do not have capital requirement. Assuming we don't make any profit, we will require Rs 200 crore capital and both the partners have deep pockets. So, it will not be a problem. We have reported a net profit of Rs 38 crore in the first quarter of this financial year and hope to end the year in positive. So, we can plough back some of it.
Are you looking at acquisition at the moment?
It is too early to say. If the acquisition makes sense, then we will consider.
What share of the market you would like to have by the end of the year?
We are the number one private player of the insurance industry. We have 18.6 per cent of the market share among the private players, which we would like to increase to 25 per cent by the end of the year. We would focus on both top line and bottom line. Ultimately, the aim will be to be number one in customer service. Rest will automatically follow.
What are you views on the open architecture?
We are saying that banks should sell product of only one insurance company. Say for instance, if SBI sells insurance products of SBI Life, the customer relates himself to the bank and the bank executive with the insurance company. With products of more insurance companies, the bank will not know which product to push. There is, however, a committee working on the matter.