 "We want Ulips to form 45% of our portfolio: Arijit Basu")
Insurance firm SBI Life Insurance has shown growth in both profitability and new business premiums, at a time when the industry has just begun to emerge from the volatile economic condition to show some green shoots. Arijit Basu, MD and CEO, in an interview with M Saraswathy, talks about the importance of bancassurance in the growth and the way forward. Edited excerpts:
New business premiums have been an area of concern for the industry. How has your premium growth been steady?
We have been doing quite well, with 10-15 per cent growth on an average. This year we have been steady. The second half of the financial year is always the better period for growth and we expect significant growth this year. The economy has started picking up and hence overall, prospects are good. Those issues related to Ulips (unit-linked insurance policies) and the issue of people getting disenchanted with the industry are over. Further, the regime is also stable since the product refiling process is also over. So, on all these counts, it is positive. We are well positioned to keep pace with industry growth from now on.
At end of March, Ulips were 37 per cent of the total portfolio and we want to take it up to 45 per cent. We have achieved 39 per cent at end of September quarter. We would like to cross 40 per cent and be in 40-45 per cent at the end of this financial year. But we would not go up to 70 per cent, like some peers have. However, the overall product acceptance is good.
Bancassurance is one of your strengths, given State Bank of India is your partner. Will that continue to be your area of focus?
We have decided that the agency channel should keep doing what they are doing. But in bancassurance, the potential is much more. If you look at the potential which SBI and associate banks offer, 20,000 branches, 25 crore customers, the conversion rate from that is significantly higher.
We have already begun to take steps like putting more people in premium branches from our side which enable us to have very significant growth from bancassurance, Starting from Q3, the numbers should be better.
Would the focus be on increasing the average ticket size?
Increasing the average ticket size is one of the strategies. For us, it is around Rs 24,000-25,000 this year. Some of our peers have Rs 40,000 average ticket size, because they have focussed entirely on Ulips and some have 70-75 per cent. We don't want to go to that level.
Ours will be a volume-driven strategy and partial increase in premium size in select areas. If we have 20,000 branches, what we are trying to do is select about 10 per cent of the branches. We have selected about 400 branches where we have rolled out some initiatives of extensive focussing. We want to ramp it up to 1000-2000 by end of March 2015. So here, growth rates would not remain confined to 20-25 per cent, it would be much higher.
Would all the SBI branches play an equal role in bancassurance?
We want to have is higher activation in the branches that don't contribute. Roughly, 35 per cent to 40 per cent of State Bank branches are active. If we can take that to 80 per cent, it would contribute to the overall growth. If village branches could sell a simple policy a month and it is not difficult at all. If we are able to do that we get the volumes and get acceptance in the market. We want it to be multi-channel company with higher returns from bancassurance channel.
Going online has been a mantra for life insurers now. Since you already have a product (eShield) for that segment, will you have more products on the internet?
We are taking a lot of technology initiatives. Our IT system is being revamped to make it more robust, speedy. We want to use technology more for analytics. We have floated an RFP for digitalisation that will help us to see how best we can use various digital channels.
The online mechanism of purchasing policies will be a part of this. We want to be fully positioned so that the transition is smooth. We advertise in our site and through it, we get Rs 1-1.5 crore of business every month. It shows that people are willing to buy pure term protection policies.
Persistency has been an area of concern for the industry. But, SBI Life's numbers on this front have seen a good improvement.
For us, it has been a steady improvement. As of Q1 end, our 13th month persistency (based on premium) was at 75.8 per cent, 25th month was 66 per cent and 37th month at 61 per cent. We are better than our immediate peers here.
For the fourth and fifth years (49th and 61st month), we are better than the best in the markets. For the 49th and 61st month, we have improved our persistency ratio, but they continue to be a little low.
Are you looking at additional infusion of capital this financial year?
We have made a review and we feel that with the growth scenario that we talked about, we are well positioned for the next 3-4 years and don't need any capital. Internal generation of profits will help us to sustain. Subsequently, we will take a call.
New business premiums have been an area of concern for the industry. How has your premium growth been steady?
We have been doing quite well, with 10-15 per cent growth on an average. This year we have been steady. The second half of the financial year is always the better period for growth and we expect significant growth this year. The economy has started picking up and hence overall, prospects are good. Those issues related to Ulips (unit-linked insurance policies) and the issue of people getting disenchanted with the industry are over. Further, the regime is also stable since the product refiling process is also over. So, on all these counts, it is positive. We are well positioned to keep pace with industry growth from now on.
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Ulips are back with a bang in the market. Will SBI Life also increase its Ulip portfolio?
At end of March, Ulips were 37 per cent of the total portfolio and we want to take it up to 45 per cent. We have achieved 39 per cent at end of September quarter. We would like to cross 40 per cent and be in 40-45 per cent at the end of this financial year. But we would not go up to 70 per cent, like some peers have. However, the overall product acceptance is good.
Bancassurance is one of your strengths, given State Bank of India is your partner. Will that continue to be your area of focus?
We have decided that the agency channel should keep doing what they are doing. But in bancassurance, the potential is much more. If you look at the potential which SBI and associate banks offer, 20,000 branches, 25 crore customers, the conversion rate from that is significantly higher.
We have already begun to take steps like putting more people in premium branches from our side which enable us to have very significant growth from bancassurance, Starting from Q3, the numbers should be better.
Would the focus be on increasing the average ticket size?
Increasing the average ticket size is one of the strategies. For us, it is around Rs 24,000-25,000 this year. Some of our peers have Rs 40,000 average ticket size, because they have focussed entirely on Ulips and some have 70-75 per cent. We don't want to go to that level.
Ours will be a volume-driven strategy and partial increase in premium size in select areas. If we have 20,000 branches, what we are trying to do is select about 10 per cent of the branches. We have selected about 400 branches where we have rolled out some initiatives of extensive focussing. We want to ramp it up to 1000-2000 by end of March 2015. So here, growth rates would not remain confined to 20-25 per cent, it would be much higher.
Would all the SBI branches play an equal role in bancassurance?
We want to have is higher activation in the branches that don't contribute. Roughly, 35 per cent to 40 per cent of State Bank branches are active. If we can take that to 80 per cent, it would contribute to the overall growth. If village branches could sell a simple policy a month and it is not difficult at all. If we are able to do that we get the volumes and get acceptance in the market. We want it to be multi-channel company with higher returns from bancassurance channel.
Going online has been a mantra for life insurers now. Since you already have a product (eShield) for that segment, will you have more products on the internet?
We are taking a lot of technology initiatives. Our IT system is being revamped to make it more robust, speedy. We want to use technology more for analytics. We have floated an RFP for digitalisation that will help us to see how best we can use various digital channels.
The online mechanism of purchasing policies will be a part of this. We want to be fully positioned so that the transition is smooth. We advertise in our site and through it, we get Rs 1-1.5 crore of business every month. It shows that people are willing to buy pure term protection policies.
Persistency has been an area of concern for the industry. But, SBI Life's numbers on this front have seen a good improvement.
For us, it has been a steady improvement. As of Q1 end, our 13th month persistency (based on premium) was at 75.8 per cent, 25th month was 66 per cent and 37th month at 61 per cent. We are better than our immediate peers here.
For the fourth and fifth years (49th and 61st month), we are better than the best in the markets. For the 49th and 61st month, we have improved our persistency ratio, but they continue to be a little low.
Are you looking at additional infusion of capital this financial year?
We have made a review and we feel that with the growth scenario that we talked about, we are well positioned for the next 3-4 years and don't need any capital. Internal generation of profits will help us to sustain. Subsequently, we will take a call.