Don't want to jeopardise banking relationship because of Ulips: Vighnesh Shahane

Q&A with CEO & whole time director, IDBI Federal Life Insurance

Private life insurer IDBI Federal Life Insurance says it will continue to focus on traditional products, at a time when the market is heavy on Unit-Linked Insurance Products (Ulips). In an interview with M Saraswathy, Vighnesh Shahane, CEO & whole time director, IDBI Federal Life Insurance explains this decision and the way forward. Edited excerpts:

Life insurers are going heavy on Ulips. Are you looking to change your product strategy?

We are a bancassurance-led company. Many years back, when insurers went ballistic on Ulips and markets dropped, it came back in form of customer complaints. Just because markets are buoyant, it should not be sold. Customers should buy them for the right reasons and we should sell for right reasons.

It should be looked at as a long term investment than short term speculative instrument. Unless I am convinced that customers buy and our sales people sell for right reason, I don’t want to jeopardise a banking relationship because of an insurance product. If they burn their finger with Ulips, they could stop their relationship with a bank. 

Your new premium growth is on track. Have renewals also risen?

In FY15 we had growth of 15% in individual premium, our total premiums (including renewals) rose from Rs 827 crore to Rs 1,070 crore. Our target was to cross Rs 1,000 crore and we did that. That took care of the top-line, but our persistency was also in the top quartile. 

In Q1, our individual new business premium grew by 145%. We did Rs 90 crore compared to Rs 37 crore in Q1 of last fiscal. Similarly, renewals have also grown by 19%. 

IDBI Federal had launched claims guarantee last year. How has it performed?

The performance of claims guarantee scheme, where we settle claims in just eight working days or we pay 8% per annum interest for each day of delay, was good. We haven’t made any interest payment which shows that there was no delay in the claims payment process. 

Further, our complaint turnaround time has gone down from 12 days to five days. This is even better than the regulatory mandate of 15 days.

Does bank channel continue to dominate the distribution channel mix?. 

Bancassurance will always remain dominant channel for us and its percentage in total business mix from different channels will always be high. However, we want the overall pie to increase. 

You have launched an online product now. Do you think you are late into this space?

We have just launched the online product, but are yet to market it in a big way. We will do it from September. While there are others in this space, the truth is that people are still grappling with the right formula for the online channel, as to whether it should be price or customer convenience. 

The advantage about starting late is that you can learn from other's mistakes and come with a better proposition than what you would have three years back.

Since your peers are going big on the health insurance space, are you looking to enter this market?

There is no plan as of now. Medical costs are increasing and there are good opportunities. But this is not our playing field as of now. But, we may plan some health riders in the future.

Though the government has launched Pradhan Mantri Jeevan Jyoti Bima Yojana, several private life insurers including you have stayed away from it. Any reason?

We haven’t gone for it now since we feel there is a risk of anti-selection and are not sure about how commercially viable they are. We are taking wait and watch approach.

However, several of our bank branches are in rural and semi-urban areas and we do cater to these markets with our products.