With the entire life insurance industry eagerly waiting for the traditional product guidelines to be released, IDBI Federal Life Insurance is betting on adequate re-filing time for existing products. Managing director and chief executive officer G V Nageswara Rao explains the reasons for his concerns and the company’s strategy for 2013, in an interview with M Saraswathy. Edited excerpts:
The insurance regulator is expected to come up with new product guidelines. Some of the products of IDBI Federal, such as Incomesurance, are doing well. Are you concerned that the product guidelines would be a constraint?
It’s very important that sufficient transition time is allowed for re-filing of products, since changes would be wide-ranged. Incomesurance is doing very well and is one of our top selling products. But the challenge is that it may have to be changed after new guidelines. We hope that adequate time is allowed. In 2013, reworking our product suite and re-train our staff will be a focus.
Would the company appoint additional agents to sell products under the new norms?
It’s a huge challenge to restructure the portfolio. We will need to train our entire sales force on the new products and this will be a challenge for the industry. It’s not practical to hire new staff in products function and actuarial functions, in order to re-file products.
Your portfolio has been tilted towards traditional products. With markets showing signs of recovery, will there be focus on unit-linked plans?
About 90 per cent of our products are still on the traditional front. Due to the nature of Ulip (unit-linked insurance policy) guidelines, amount of commissions we are allowed to pay is low, very little interest among distributor to sell these products. With better markets, there is some degree of change. But we don’t expect any significant change.
So, have you made any representation to Irda (Insurance Regulatory and Development Authority) to revisit the guidelines on Ulips?
Ulip as a product is more transparent. It’s mainly because of the guidelines why Ulips has lost its sheen. Making changes in the surrender charge and bringing more flexibility on how one structure the charge within the cap can help in increasing Ulip sale.
Some of your peers have launched pension products recently. Would you be the next to do so?
We have filed for a new product under traditional category for pension. We are yet to receive approval. Though the non-zero guarantee is better than 4.5 per cent guarantee norms that existed earlier, we are still far away from a period where pension will again become a big part of our portfolio.
You already have IDBI Bank as your bancassurance partner. How many more will you rope in? Also, what are the other distribution channels you are looking at?
Once the bancassurance guidelines are announced, we will rope in another additional partner. Apart from this, though agency distribution channel is existent, it has its own challenges. Online channel is also being explores, but it’s a small channel for us now.
Despite existence of a large number of private players, Life Insurance Corporation of India (LIC) is still gaining market share. Meanwhile, in spite of having strong bancassurance partners, why haven’t companies like IDBI Federal Life not been able to catch up?
LIC is strong on traditional products and we have not been very strong in that segment. The challenge is to build strong portfolio of traditional products.
LIC has always been strong in agency distribution. For us private insurers, agency sales numbers are coming down every year. We also face the issue of attrition since we have young agents.
Also, renewal premiums are also higher for LIC. Hence, even if their new business premium numbers dwindle, renewal premiums make up for that loss.
