We want to have 20% Ulips in business mix: Kshitij Jain

Interview with MD & CEO, Exide Life Insurance

Exide Life Insurance, which underwent a name change last year, is looking to re-align its business mix to improve unit-link insurance plan (Ulip)’s share in it. Kshitij Jain, managing director and CEO, talks to M Saraswathy about this strategy. Excerpts:
 

Exide Life has seen an uptick in new premia. But your new business mix is heavily focused on traditional products. Why?

We have decided we will focus on long-term products. So Ulips were among the lowest. We have done 96 per cent traditional products and would have among the highest share of traditional products for a long time.

Are you looking to change this mix?

We believe there is a significant market in Ulips as well and we’re not happy with our current mix towards traditional plan. We recently launched a Ulip product, which evolves with a customer's life stage growth and is not plain vanilla.

My belief is that we as an organisation should do close to 20 per cent of our business in Ulips. Co-incidentally, when we launched the product, there was a correction in the market.

There have been several mis-selling complaints of Ulips in the industry. What steps have you taken to deal with it?

My only challenge with Ulips is that while you would want customers to stay for long, customers tend to exit very fast, defeating the purpose of insurance to start with.

Hence, we decided for middle and upper middle class, the focus should be long-term savings and protection products on trade platform. Above upper middle class, we will focus on Ulips. We have made sure the product is not available to persons who cant afford it; hence, annual premiums are high for Ulips.

The regulator has raised concerns about some pension products in the market. Have you filed any new pension product?

We are exploring options on annuity space and have filed a single premium annuity product that offers better returns. We are also going to be doing a protection plan, which will be a term plan with return on premium.

The final guidelines for opening up the corporate agency channel, which includes large banks, is being brought out. Are you hopeful of tying up with banks post this?

We have among the largest number of tie-ups with cooperative banks. These banks play a big role in customer acquisition though not much in getting premiums. We are in talks with a number of banks. From a bank's perspective, once the insurer's initial public offering is done, fee income from it would not matter.

Are banks promoting insurance companies willing to tie-up?

Promoter banks have not said no; they are also keeping their options open. Our business is in a sweet spot since we were incubated as a bancassurance-led insurer. We have had the track record of selling long-term traditional products through a bank channel till last year. As and when regulations clear up, we should be one of the players banks would like to do business with.

For the first quarter, there has been a drop in your persistency for 13th and 25th month. Why?

We were doing well with persistency when we were selling a large portion of our business in three-pay products. Regulatory changes meant three-pay disappeared as a portion of our portfolio.

When short-pay products get replaced by long-term products, then short-term customers tend to exit longer term products easier as they have less to lose. But with longer-term products, 37th and 61st year persistency becomes better. This is a temporary correction. By December-end, we will be looking good in persistency in these brackets as well.

What is your premium growth target for FY16?

If the sector looks up this year, we will grow new business upwards of 30 per cent. Even at that rate, I would not need any additional capital.

You are among the few players without a foreign partner. Is it a concern?

We haven't had a foreign partner for a while now and our business has only done better. There was a concern when it was announced that ING would exit. But when it did, it did not have any impact on our business. ING helped build strong governance in the organisation and ensured that we have all the technology and skills to run it.

Having said that, the shareholders have said that in the long-term it is their stated intent to induct a new shareholder. But that will happen in the future.  We already have shareholders who are not only cash-rich but have a long-term view of the business.