Birla Sun Life Insurance Company
Size of the company: Rs 120 crore
Joint venture partners: Aditya Vikram Birla Group and Sun Life Financial of Canada
Aditya Vikram Birla Group: The group, headed by Kumaramangalam Birla, is one of the largest Indian conglomerates with a total turnover of Rs 26,000 crore. With business interests ranging from viscose filament yarn to aluminium,cement and textiles, the group has an asset base of over Rs 18,000 crore.
Sun Life Financial: More than a century old, the Sun Life Financial group provides financial solutions in the areas of life & health insurance, pension funds, investment management, brokerage and banking. Sun Life Assurance company of Canada, Sun Life Financial's primary insurance business, has been rated AA+ by Standard & Poor for financial strength and AAA1 for claims paying ability by Fitch. As on September 30, 2000, it had assets under management of CDN$345 bln.
India plans: The company has launched three schemes till date. It has a presence in five cities and sells through its dedicated individual agents and corporate agents. The company has sold 3,000 schemes to individuals with premiums totalling Rs 3 crore. Its group insurance business has brought in a premium of Rs 6.5 crores through one scheme.
CEO Speak
On the risk of doing business with private insurance companies: The IRDA has laiddown very stringent regulations, so I do not see any solvency risk. All the private sector players that have entered the scene are global players with tremendous experience in the areas of insurance and and asset management. Their managements are strong and these are companies that will stay in the country for a while. So there is little risk associated with private sector insurers.
On the uniqueness of Birla Sun Life Insurance: In our judgement, the insurance market is evolving from the customer being a nobody to somebody to being the king. This has compelled insurance companies to launch more customised products like unit-linked products in the developing world.
At Birla Sun Life, we are bringing in customer-orientation by maintaining individual investor accounts. We are also focussing on technology to service our customers better. We are trying to switch insurance selling from tax-based to a need-based one.
We are trying to do this effectively by controlling distribution - not by over-promising. We also charge a lesser premium for female lives in recognition of better mortality rate among women. Product-wise, we have a pure term plan which allows you pure risk cover at a very low premium.
Possible caveats in the growth phase: If any of us (insurance companies) make a mistake, it will affect the whole industry. The biggest danger lies in offering higher assured returns. Mis-selling is another threat.
OM Kotak Mahindra Life Insurance
Size of the company: Rs 150 crore
Joint venture partners: Kotak Mahindra Group and Old Mutual Plc, London
Kotak Mahindra Finance: The flagship company of the Kotak Mahindra group, is one of the healthiest finance companies in the country. This leading financial services firm has a networth of Rs 500 crore and has offices spread across 40 cities.
Old Mutual Plc: Old Mutual Plc is an international finance services group based in London with expanding operations in life assurance, asset management, banking and general insurance.
With 156 years of experience in the life insurance business, Old Mutual acquired the Gerrarg Group in the United Kingdom and United Asset Management in the United States last year to become an even bigger company with total assets under management of $252 bln (as on 31st December, 2000).
India plans: OM Kotak Mahindra Life Insurance has operations in seven cities and has set a target of 13 cities by the end of this fiscal. The company currently has upwards of 500 agents, and intends to have over 2,000 agents by the end of the fiscal. The company has targeted sales of approximately 30,000 policies in the first year of operations. And it claims to have managed 3,000 policies till date.
CEO Speak
On Om Kotak Mahindra edge: Life Insurance : Insurance continues to be a 'push' business, with a large part being sold by the agents. As far as we are concerned, we are primarily focussing on our natural markets. And, natural markets for us include the friends and associates of the 500-odd agents.
Besides, it also involves the whole of the Kotak family. The clients of the Kotak group -- the near 500,000 customers and debenture holders -- form our natural market. As far as the products are concerned, there isn't much of a difference between most of the products the private sector players offer.
On how the market would evolve: Out of the total population of the country, an estimated 30 crore are insurable, of which the insured population is around 8 crore. The 12 crore policies sold by LIC are basically because each one is estimated to hold around one policy and a half.
Moreover, a large section of the population is under-insured. So, there is a large enough market for all the nine players present currently, as well as the six more that are expected to enter soon. LIC managed to sell around 2 crore policies last year - a jump of approximately 40 per cent. Going forward, the private sector is expected to garner approximately 25 per cent market share.
Tata AIG Life Insurance Limited
Size of the company: Rs 125 crore
Joint Venture partners: Tata Group and American Internaional Group Inc
Tata Group: The Tata Group is the most respected industrial conglomerate in India, with revenues of more than $ 8 billion. The group has long been a market leader in steel, commercial vehicles, electric power generation in the private sector and computer software. In recent times, it has promoted several new ventures in high growth areas like telecommunications and information technology.
American International Group Inc (AIG): AIG is the leading US-based international insurance and financial services organisation and the largest underwiter of commercial and industrial insurance in the United States. It has a high safety AAA rating by S&P.
India plans: Tata AIG insurance plans to provide life and general insurance solutions to individuals and corporates. For individuals, Tata AIG Life currently has term, endowment as well as money-back products.
CEO Speak
On the risk of doing business with private insurance companies: Insurance is a long term business. Companies enter into the market only after very careful deliberation and recognising that there needs to be a deep commitment to the market.
Moreover, there are enough safeguards built in the IRDA guidelines. So we do not see any solvency risk and customer interest is well protected. Tata AIG combines the financial prowess, and integrity of the Tata Group, with the international expertise and financial strength of the American International Group, Inc. (AIG) - the world's largest insurer by market capitalisation.
On their Unique Selling Proposition (USP): Our USP is the high quality of services offered to customers. Traditionally, in India, policies have been sold through agents appointed by the insurance company. One of the key differentiators we want to create is to provide various channels of contact with the customers.
Physical contact with customers can occur in two ways: first, the push strategy through agents. The other is to create an oppotunity for the customer to come to you. That is the pull strategy. ATMs in the banking industry is an classic example of the pull strategy. We are investing heavily on call centres, back office processing and others conventional and non-conventional distribution channels.
Max New York Life
Size of the company: Rs 200 crore of equity.
Joint venture partners: Max India Limited and New York Life, US.
Max India Limited: Max India Ltd is a leading Indian company with diversified business interests. The company was set up in the joint sector in Punjab in 1982. It is primarily into the business of pharmaceuticals, metallised plastic films and BOPP films for the flexible packaging industry. The company also has an IT solutions division.
New York Life: New York Life is a fortune 100 company and claims to be one of the largest providers of life insurance coverage in America.
The company has over 155 years of experience. The company has over $ 138 bln in assets under management. New York Life Insurance Company has been highly rated by leading independent rating agencies like A.M. Best (A++), Duff & Phelps (AAA), Moody (Aa1) and Standard and Poor (AA+).
India plans: Max New York Life has launched its products in nine cities across India. The company markets its five products primarily through life insurance agents and advisors.
On fighting competition: We will focus on risk protection and financial security to the family. Indian consumers are not driven to invest in life insurance as a measure to protect their families from the vagaries of life.
Historically, Indian life insurance has traditionally been driven by tax-saving needs and investments and there is a tremendous opportunity to close the gap by changing the paradigm of life insurance from a tax- saving tool to a risk-protection solution.
On their value proposition: We aim to provide comprehensive risk protection in a country where a sizable portion of the population is either uninsured or under-insured. We have policies which offer customers a choice between products that are oriented either towards risk protection or savings. Max New York Life has the vision to be the most admired life insurance company in India.
ICICI Prudential
Size of the company: Rs 150 crore
JV partners: ICICI and Prudential Insurance, UK
ICICI: ICICI is one of India's largest financial servicer provider. Formed in 1955 as a development bank at the initiative of theWorld Bank, the government of India and representatives of the Indian Industry, ICICI has evolved from being a traditional development finance institution to a financial conglomerate providing a spectrum of financial solutions to corporate as well as retail clients. In 1999, it became the first Indian company to be listed on the NYSE. It manages assets worth Rs 73,400 crore.
Prudential: Prudential is one of the largest life insurance and mutual funds company in the United Kingdom.Founded in 1848, it has grown to become one of the largest providers of a wide range of savings products for the individual including life insurance, pensions, annuities, unit trusts and personal banking. It has a presence in over 15 countries, and caters to the financial needs of over 10 million customers. The company mananges funds over $ 270 billion worldwide.
India plans: The company has launched six schemes till date. It has a presence in seven cities. The company has sold 6,387 schemes with a total sum assured of over Rs 100 crores.
CEO Speak
Investment Strategy at ICICIprulife: Since safety of returns is our highest priority, we intend to stay with triple A and double A rated securities and government securities. The returns of our schemes are the best we can offer in the current interest rate scenario.
Uniqueness of ICICIprulife: We are backed by the strong credentials of our parent and enjoy strong brand equity. Both these factors have worked to our advantage. Our experience as professional fund managers has proved to be very beneficial
Differentiating factors for insurance companies: This would include the brand equity the company enjoys, professionalism of the investment management team, service standards and stability of returns offered.
HDFC Standard Life Insurance
Size of the company: Rs 168 crore
JV Partners: Housing Development Finance Company(HDFC) and UK-based Standard Life.
HDFC: HDFC is India's largest mortgage finance company. Besides home loans, it offers investment and savings opportunities for households.
Headquartered in Mumbai, the company has offices in 98 locations across India and serves customers in over 2,400 cities and towns. At the end of 2001, its net worth stood at Rs 2,372 crore.
Standard Life: 175-year old Standard Life is Europe's largest mutual life company. The Edinburgh, Scotland-based company has assets under management totaling over Rs 5,89,000 crore.
Premiums collected last year jumped 25 per cent to Rs 35,000 crore. It is one of the few insurance companies in the world to be awarded a AAA rating by two leading credit rating institutions, Moody's and Standard and Poor's.
Future Plans: Currently, the company has three basic products available in 11 cities. It hopes to launch more products and reach out to more cities by the end of the year.
CEO Speak
On the competitiveness of the insurance business: As per a CII study, life insurance premium is expected to grow from 6 per cent of gross domestic savings to 18 per cent over the next 10 years.
During the same period, the number of policies in force will go up from 100 mln to 180 mln. This growth will benefit existing as well as new players. Given these numbers, it is clear that there is enough scope for all the insurance companies to grow.
On how long it will take to break-even: This is a long-term business. Many factors influence when a company will break-even. The break even time is not strictly linked to sales volumes. The product profile also has a bearing on the break- even period, but by and large, it will be in the range of 5-7 years for most life insurance companies.
Main challenges facing the Indian insurance industry: There are several challenges facing any new entrant in the life insurance market. First, there is the challenge of creating a nation-wide infrastructure of high quality and well trained financial consultants. Second, we will have to manage funds in a prudent manner and work towards generating a long-term stable rate of return for the buyers of life insurance policies.
The challenge is to get the best returns at an appropriate level of risk, in a not-so-stable interest rate environment. Third, we have to ensure that every interaction that the customer has with the company, such as sales, new business underwriting, policy servicing, premium payments, claim processing and so on is a pleasurable one.
Finally, there is the perennial challenge of resisting temptation of taking short-cuts to ramp up volumes in the short term, because we cannot forget that life insurance is a long term game and any compromises made today will come to haunt, both the customer and the insurer, in the future.
ING Vysya Life Insurance
Size of the company: Rs 125 crore
JV partners: Vysya Bank, ING Group and GMR Group.
Vysya Bank: Vysya Bank is a South India-based private sector bank. With 481 retail outlets, it has a strong presence in Karnataka, Kerala, Andhra Pradesh and Tamil Nadu.
ING Group: The ING Group is the second largest life and health insurance company in the world. It offers a wide range of financial services including insurance, banking and asset management. In 2000, it ranked 7th in terms of profits, which was $11 billion and had assets worth $ 61 billion. It is also the No 1 company in the US based on life and annuity premiums.
GMR Group: The GMR Group, the second foreign partner in the venture has a track record of over decades with interest in areas like power generation, infrastructure, manufacturing, software and banking.
Future Plans: ING Vysya Life Insurance has around 260 advisors at present, and intends to strengthen it to 1,500 advisors in the current financial year.
CEO Speak
On the competitiveness of the insurance business: Right now, the new private insurance companies are establishing themselves in the market. Competition will only emerge after companies have significant infrastructure and distribution capability in place. We expect this to happen only in mid-2002.
On when they expect to break even: It will take 5-6 years to break even and 8-9 years to recuperate losses. The volume of business required to break even would depend on the cost efficiency, investment returns and mortality.
On their distribution strategy: Our core strategy would be to develop a highly professional tied agency advisor force and bank distribution through Vysya Bank, our partner. We will also develop other distribution channels such as corporate agencies.
Main challenges facing the Indian insurance industry: One of the biggest challenges is to develop consumer understanding on what benefits life insurance can bring to both the individual and the household. We have to help the consumer see life insurance as an excellent means of affordable financial protection and secure long term savings.
We also need to build a professional sales and advice capability within the current limitations for remuneration of agents. Another challenge is to develop products and services that offer value for money, are friendly and understandable for large segments of the population.
SBI Life Insurance
Size of the company: Rs125 crore
Brief on JV partners: State Bank of India(SBI) & Cardif of France
SBI: SBIis India
