At a time when private life insurance companies are facing a decline in sales, IDBI Federal Life expects to grow by 35 per cent year-on-year in 2010-11. Managing Director and Chief Executive Officer GV Nageshwara Rao, in an interview with Niladri Bhattacharya, says the industry will take another six months to align itself with the new regulations on unit-linked plans which came into effect from September, 2010. Edited excerpts:
The life insurance industry had seen difficult times since September 2010, when unit-linked norms were introduced by the Insurance Regulatory Development Authority. What is the road ahead for the industry and when do you see the industry stabilising?
Yes, I agree with you. It has been tough during the last six months, when the sales of private life insurance companies dropped by around 40 per cent. Sales in March are also expected to be low. In the next financial year, it will definitely be a challenge to maintain growth. My guess is that it should take about a year for the industry to stabilise. So, from the third quarter of this financial year, we can expect some steady growth.
Right now, we are in the process of adjusting the products. We expect a few revised guidelines on pension products, which I hope will revive pension plans again. The long-term solution is to increase productivity in a sustained manner.
There has been a change in the product mix, in favour of traditional plans. What, in your opinion, is the ideal mix and which are the product segments you would focus on ?
Under the current regime, we have to focus on selling traditional plans. The ideal mix should be balanced at around 50:50. As far as our company is concerned, unit-linked plans, which accounted for nearly 80 per cent of product sales, came down to 60 per cent in the last one year. So, right now our product mix is 60:40.
Going ahead, we would consider three segments — children, retirement and health. However, the new products will depend on changes in regulations.
Since IDBI Federal Life Insurance is promoted by two public sector banks, IDBI Bank and Federal Bank, your primary distribution channel is the bancassurance channel. Going forward, how do you plan to grow your agency channel?
The bancassurance channel has its own advantages. For us, the impact of the changing norms was less compared to other players, since the bancasuurance route accounts for nearly two-thirds of our business.
More From This Section
Having said that, we are focusing on building a good agency network as well. Over the next 12-18 months, we would double our branches to 100. Similarly, we we plan to add another 9,000 agents to the current 9,000 in the next one year.
What is your current persistency ratio?
Our first-year persistency is around 70 per cent. Renewal premiums constitute 35 per cent of the total premiums.
During the April-February period, IDBI Federal Life has written premiums worth Rs 366.44 crore. Since March is the busiest month, what is your growth estimate for the end of this financial year?
We are looking at a year-on-year growth of 35 per cent in the current financial year. In 2011-12, we are confident of maintaining the pace of our current growth.
Is IDBI Federal planning any capital infusion in 2011-12?
We are yet to finalise our budget for the coming year. However, we started with a capital of Rs 200 crore and our shareholders infused another Rs 250 crore in March, 2009. In February, 2011, we infused additional capital of Rs 250 crore to help us to grow at the aggressive rate that we had set out to achieve.