We walked the talk on value of new business: ICICI Pru Life CEO & MD Kannan

VNB has more than doubled and margins have expanded from 17 per cent to 32 per cent. So, given this, I would say, we have achieved more than we had told the market

In his last interview as Managing Director (MD) and Chief Executive Officer (CEO) of ICICI Prudential Life Insurance Company before superannuating in June, N S KANNAN, in conversation with Subrata Panda and Manojit Saha, talks about the company having achieved much more than the target it had set for itself and its focus in the current financial year (2023-24, or FY24). Edited excerpts:

The value of new business (VNB) has doubled. Margins, too, have nearly doubled from 2018-19. Would you say you have accomplished what you had set out to achieve?

VNB has more than doubled and margins have expanded from 17 per cent to 32 per cent. We have achieved more than we had apprised the market of. We walked the talk.

Margin is a derived number. I would rather focus on the absolute value of VNB — that is how we have driven our business. This has been made possible because of the diversification of the product portfolio. Our product portfolio was skewed towards 80 per cent unit-linked policies (ULIPs) earlier. Today, we have a diversified product mix, with 40 per cent ULIPs, 30 per cent non-linked savings products, 20 per cent protection, and 10 per cent annuities and other lines of business. This gives a good base for robust growth.

On the channel side, we have 39 banks. Bancassurance is about 30 per cent of our business, the agency is 26 per cent, direct business is 15 per cent, and other partners 12-13 per cent.

Are you satisfied with your top-line growth?

Retail protection suffered during the pandemic years. In 2021-22, the top line grew 20 per cent. In 2022-23 (FY23), top-line growth was 12 per cent. The other way to look at it is, given ICICI Bank’s priorities, it has been focused on banking products and its share of distribution has come down from 55 per cent to 14 per cent. In the non-ICICI Bank channel, the compound annual growth rate has been 18 per cent. Perhaps in the future, VNB development will not just be driven by margins alone, but by top line as well. 

How do you look at the expenses of management (EoM) and commission regulations?

We will be well within the limits of EoM. We don’t have to make any adjustments on the commission front.

The Insurance Regulatory and Development Authority of India (Irdai) expects the industry to be reasonable and responsible in terms of commissions. If the system is tilted more towards the distributor, it will take away from the company’s profits and customer proposition.

I believe Irdai will keep bringing down the EoM limit. If you look at the savings side of the business, the regulator has said that the commissions will be lesser in the initial period and greater in the longer period. This will push the industry towards incentivising longer-term insurance products.

The renewal premiums are given more commission, compared to the new business. Hence, the persistence of the industry may improve. Further, protection possibly has now become more attractive from the commission side than savings and that is what the real business of an insurer is.

Was there a pick-up in the sale of high-value policies after mid-March?
 

This is a natural phenomenon for the industry whenever there is a change in the taxation regime. To that extent, this March was no different. Fire sale does happen whenever there is an impending regime on the taxation side. We have a diversified product portfolio and our reliance on a particular product segment is minimal. Other companies would have gained much more than us. We would be one of the players to have got the least benefit of this change. To that extent, this is beneficial to us because it doesn’t set a very high base for us to grow.

Have supply-side constraints eased as far as retail protection is concerned?

Retail protection has grown 28 per cent year-on-year (YoY) in the fourth quarter of FY23. I do believe that starting April, there could be continued YoY growth in the retail protection business. The pricing changes are behind us. The processes, which were changed frequently, have stabilised.

The supply-side constraints have eased. We have started focusing on channel dynamics. ICICI Bank is one of the largest protection sellers for us. We have given it the analytics to give pre-qualified offers to customers. Further, the regulators’ quick approval in terms of use and file has helped.

What is the goal for FY24?

I am retiring in June. Anup Bagchi will articulate more sharply what he wants to do. The DNA of the company has been based on the absolute value of VNB.

What are your plans?

I am wedded to the company until June. Succession management has to be done properly. I am retiring, not quitting.

There are rumours that you could head to a large business house that is setting up its insurance business.

Honestly, haven’t given it a thought.