Principal PNB Life to traverse hinterland

US-based Principal Financial Group plans to transform the way life insurance products are structured in India when its joint venture with Punjab National Bank kicks off operations.

Apart from selling life insurance, it seeks to address other customer needs such as cover for dreaded diseases, accidents and hospitalisation.

The life insurance joint venture - Principal PNB Life Insurance Co - also has Vijaya Bank and UK (Berger) Paints as equity partners. Principal Financial already has partnered Vijaya Bank and PNB for asset management, insurance brokerage, mutual funds and insurance advisory company.

In an interview with Business Standard, Norman Sorensen, president and CEO, Principal International, said, "Our products will be very innovative addressing customer needs such as life insurance as well as potential dreaded disease, potential accidents and potential hospitalisation type products."

According to him, the company will be a bancassurance-driven life insurance company having a model aimed at penetrating the lower middle and middle class Indian households, which are currently not being fully addressed by life agency operations.

The company expects to get a life insurance licence in time for launch by January 2007.

"We will not have an agency operation such as LIC, Allianz and those players which are effective with the top level of the society as that market is already being serviced by many competitors," Sorensen said.

"Penetration of life insurance in rural Indian household is still very low primarily because the traditional agency life insurance method used by most of our competitors deals with affluent Indians. Since agents live on commission, they don't find it cost effective to sell small premium policies, therefore rural areas get ignored," he added.

Rex Auyeung, senior vice-president and chief executive for Asia at Principal Financial, said, "We will do a detailed market survey to make sure that the products are market driven and economical for the middle class. The type of products we have in mind are group-based products, employer insurance products that are economical for different employer groups."

He added, "Mutual funds, asset management, insurance brokerage, financial planning, and eventually life insurance company, all these will be driven through effective bancassurance network. We want to be a one-stop shop for financial needs of customers. We have similar banking partnerships around the world and are leveraging our bancassurance-driven strategy now in India."

According to him, technology, geographical coverage and hiring talent will be a challenge for penetrating rural India.

Besides, creating a brand too will be a challenge as local players such as UTI, SBI are already successful players.