Our foreign partner is keen to increase stake to 49%: Anoop Pabby

Interview with MD & CEO, DHFL Pramerica Life Insurance

Private life insurer DHFL Pramerica Life Insurance is looking to scale up its affinity distribution model. Anoop Pabby , managing director and chief executive officer, talks to M Saraswathy about the company’s strategy. Edited excerpts:

Private life insurers’ new business  premium  has been seeing consistent growth since the past financial year. Will it continue this year as well, especially for the company?

Growth has been good in the industry, where the private sector market share is pacing up. Further, group business is outpacing retail in life insurance. Also, insurers believe that engagement of customers and core emphasis on savings orientation is far more economical through a group platform than through retail. We moved up in the rankings from 23 to among top 15.

We achieved break-even due to increase in revenue and severe cost restructuring, without compromising the quality of people on board. Further, we have reduced staff strength.

When are you planning to enter online insurance space?

We plan to launch in the next one to two quarters. A lot of research has gone into it and we have approval. We are going to the regulator for approval for some other products for online sale with respect to discount/benefit for customers and wellness among others.

However, some traditional products will still need agent support during the purchase. Presently, the approach most insurers have taken for online term plans is flawed. We are planning an online product but not an online term. Our product will have protection as a key component and will have components of endowment and saving.

While you already have DHFL as a partner, what are the newer distribution channels you are investing into?

In the agency channel, we have segmented it into sub-segments such as paramilitary personnel, self-employed, teachers and shop-keepers, and hired respectable people as our agents. We saw an exponential growth in our numbers. This channel contributes 40 per cent of non-DHFL business and this financial year, we will take a call on whether to invest further into this, to make it more scalable. We also worked with certain key distributors in south and west India, in rural and cooperative bank platform and taken on board a lot of customers.

Now that the insurance Act has come into force, has your foreign JV partner taken a decision to hike its stake?

Our foreign partner, Prudential Financial (Pramerica), is keen to take it up to 49 per cent and have expressed its intent. Discussions are progressing well.

The bank channel is being opened. Are  banks  ready to tie up with other insurers to sell products?

The bancassurance segment has been growing outpacing every individual segment in the market. If you take bancassurance out from the entire pie, it is growing at a faster pace. Here, the early movers with bank partners and shareholders are at an advantage. Creating a new relationship with customers only based on life insurance is a challenge.

We see quite a few public sector and some private banks which are not shareholders in insurance ventures as potential partners. We will go to them once the guidelines are out.

Since the new partner is on board for  some time, has the cost rationalisation been completed? How much premium growth do you expect in FY16?

Our key intent was to rationalise cost and there was a lot of ambiguity. Productivity went down. We took a decision to cull out non-productive ones and to reward productive ones in a more handsome way. We have opened 20 new branches in the past 15 months, and are opening 15 more in the new financial year.

We expect 50 per cent growth from last year on APE basis.

That would translate into an AUM (asset under management) of about Rs 2,200 crore by the end of this financial year. We are a protection-centric company; there will be a lot of traditional products on sale.

Your unit-linked insurance product (Ulip) share in new business has been low. Would you look to increase it?

In our new business mix, Ulips are 10%, while it contributes 5% to our assets under management (AUM). We are not aggressive on Ulips and do not want to be aggressive in it. It is a volatile space and margins are fairly low in this product.

Distributors expect insurance kind of payouts in these products and they want to go for product which have healthier commissions. In the valuation game, Ulips do not contribute healthily to growth of your embedded value,

While it is a necessary product to have in the bouquet since some customers want it. we would not cross the 10% threshold in Ulips.