A week after announcing the deal with Nippon Life, the largest Japanese life insurer, Reliance Life is set for the next level of growth. Malay Ghosh, ED & President, talks to Niladri Bhattacharya on the details and other matters. Edited excerpts:
There are some regulatory issues surrounding the deal between Reliance Life and Nippon Life.
It is a strategic investment from Nippon’s part and they have assessed the long-term scenario and the growth potential of India’s life insurance market and Reliance Life. We are confident of receiving necessary approvals from the government, Insurance Regulatory and Development Authority (Irda) and the Reserve Bank of India expeditiously, for the largest-ever proposed foreign direct investment, of over Rs 3,000 crore, in the financial services sector. The proposed investment is a resounding vote of confidence in the growth potential of the Indian economy, and the life insurance sector, and we believe it will be welcomed.
Which areas have you identified, where Nippon Life will have a major role?
The first area where Nippon Life will play a huge role is product development. We will look to develop new products, based on their experience in Japan. Since Nippon has been writing policies from World War I, it has witnessed how Japan transformed from a developing economy to an economic powerhouse. The other area will be risk management, particularly management of external risk, as in how it should be quantified and managed. Third, since both companies are agency-driven, we would like to work together on how to improve the productivity of the distribution channel.
When will the new products start rolling out? What could be the possible products with a strong Japanese influence?
We expect to roll out products jointly in six months. Nippon Life has written policies suiting the changing demographics. For example, it has great expertise in pension and annuity products for senior citizens. Also, they have devised products when interest rates were near zero. So, we will bring in some products which are not used in Japan any more, but suit Indian demographics.
The other kind of products could be health top-ups. Then, in the developed world there are products where premiums, sum assured, etc, can be changed from time to time, depending on the requirements. It will take some time before we start rolling out these products, as these should be priced properly.
A lot has changed after September, after the new norms for unit-linked plans and pension plans were introduced by Irda.
The regulations are good for the industry, going forward. As a strategy, we have always been in the mass market and, hence, the share of traditional products in our portfolio has been close to 50 per cent. So, the changes in regulations didn’t affect us. As a strategy, we are trying to popularise health insurance. We will be coming out with a universal life insurance product on the variable insurance platform.
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What is the persistency level for Reliance Life? What is the current solvency ratio and how will it go up after the Nippon deal?
The ideal persistency ratio for a life insurance company should be 75 per cent. Normally, it takes eight years for a life insurance firm to achieve this. Currently, our first-year persistency level is 68-69 per cent, which we should increase to 75 per cent over the next two years. Currently, our solvency ratio is round 160 per cent. After this deal, it will go up to around 300 per cent, since a part of the capital will be invested in Reliance Life.
How do you see your new business premium growing? What is the share of renewal premiums?
This financial year, we expect to collect premiums of Rs 3,500 crore by writing new policies. Next year, we are targeting a growth of 20-25 per cent. Renewal premium has grown by around 25 per cent during the current financial year, to Rs 3,500 crore. It is now 50 per cent of our total premiums’ income, which is expected to be around Rs 7,000 crore by March 31.