IDBI Federal Life, a three-way joint venture between IDBI Bank, Federal Bank and Ageas, a Europe-based insurance multinational, posted its best-ever results last financial year. It declared a net profit of ₹101 crore, a growth of 94% over FY17, marking the sixth consecutive year of profit. Vighnesh Shahane, CEO and whole-time director, IDBI Federal Life Insurance, says that this speaks of the strong culture of the organisation which encourages quick decisions, provides accessibility to senior management, an apolitical work environment, employee-friendly policies and open, honest conversations across hierarchy. Edited excerpts:
What is your focus for 2018-19, given that the life insurance industry is looking at growing the protection business and also getting the right product mix?
Over the last one year, because of the stock market bull-run, we have seen a lot of demand for ULIPs (unit-linked insurance plans). However, historically, we have primarily been a seller of non-participating products largely due to the customer base of the banks, which prefer traditional plans with guaranteed returns.
So, while last year’s product mix was 43% ULIPs, 23% non-PAR and 33% PAR products, this has not always been the case. Going ahead, we would look at focusing on the PAR and non-PAR segment as 80% of our customers are bank customers and hence, we would prefer to sell them safer, conventional, guaranteed products that they desire.
Bancassurance has been your dominant distribution channel. How do you plan to consolidate on the channel, given the fact that open architecture is now a reality? Also, which other channels are you looking to nurture and grow?
We have seen that over the last 10 years, 80% of the company’s business has come from the Bancassurance channels, mainly IDBI and Federal Bank. The two shareholders have a pan-India presence with over 3,000 branches and provide us with a low-cost, hygienic platform to reach out to customers and do business.
Over the next five years, the percentage of Banca would continue to remain at 80% but the overall pie would grow. In terms of other channels, we are looking at growing the agency business in a calibrated, smart manner as our focus is on profitability.
When it comes to the online front, it is in an extremely nascent stage, contributing around 3% of the premiums at this point of time, but we want to take it to around 5-7%.
We are also taking baby steps in the superannuation and gratuity space, and want to get more aggressive in the group protection space with our protection product for housing loan customers of the bank.
Most of the prominent life insurance players have focused on ULIPs in the last few quarters. How do ULIPs play out in your scheme of plans?
We have always been a traditional platform player, because these are the kinds of products that the customer base of our distributor banks are comfortable with. The last year, however, saw an upsurge in ULIPs due to booming markets. A market-linked product requires more understanding than a traditional product, from both from a customer and seller’s point-of-view.
Hence, we would be selling these products to a customer only after doing a thorough needs analysis, understanding his risk profile and if we are convinced that he completely understands the product.
Was the life insurance industry able to benefit from the disruption caused by demonetisation? Did demonetisation help the life insurance industry?
Post-demonetisation, we saw a huge movement of investments to financial assets viz. mutual funds, life insurance.
We saw a quantum jump in the premiums collected in Q4 of FY 2016-17. This is because a lot of informal money came into the formal banking channels and found its way into formal investment routes.
Increasingly, people are looking at comprehensive insurance solutions. Life insurance players are getting aggressive to enter into the health segment, what are your views on the same?
At IDBI Federal, we do not have a health or pension product. When a customer walks into a bank, we believe that as a financial consultant, our job is to give him the best advice. If he is interested in a health plan, then he would be able to get a far superior health plan from the non-life or health company whom the bank has tied up with. If, as a life insurance company, we try to sell a health plan which is not as sharp as theirs, then we are mis-selling to the customer. I believe that avoiding such practices leads to higher persistency and lower customer complaints.
Do you feel that mutual funds are direct competitor to ULIPs?
Both are products of different categories and hence, it would be not fair to have a direct comparison.
While I agree that both invest in the markets and have a similar pattern of investment, the biggest differentiator between mutual funds and life insurance would be the time horizon that the customer has for the investment.
If he has a short-term view, he should invest in mutual funds, but if he has a medium to long-term view, he should invest in ULIPs.
How has been this fiscal year overall for the life insurance sector? Where do you see business coming from?
The fiscal year has been a good one; we saw steady growth of business.
Banca [assurance] shall continue to be our growth engine. And as mentioned earlier, we will continue to take calibrated steps to grow the agency, online and group channels, and this would help grow the business pie.
