SBI Life least affected by new surrender norms: MD & CEO Amit Jhingran

Following the company's Q2 earnings, SBI Life Insurance managing director and chief executive officer (MD&CEO) Amit Jhingran spoke on the road ahead for the company

Following SBI Life Insurance’s Q2 earnings, managing director (MD) and chief executive officer (CEO) Amit Jhingran spoke with Subrata Panda and Aathira Varier on the road ahead.

 

Jhingran also talked about how the company is positioned to leverage various opportunities emerging in the sector. Edited excerpts:

 

How do you see SBI Life’s Q2 performance?

 

We are satisfied with our growth. As a strategy, we have decided to focus more on agency so that there is a balance in the channel mix. Currently, our banca channel (bancassurance) contributes 60-65 per cent to our top line. We launched agency 2.0, and the growth in the agency channel has been above our budgeted targets. Our banca channel growth has been somewhat muted. Additionally, we are consciously trying to tap the digital channel available on the banca side. And, we are also tapping State Bank of India’s (SBI’s) YONO platform. We have launched 7-8 products on the YONO platform. We hope that this will provide us with a good fillip in the second half.

 

How do you see your margins, going forward, especially with the surrender value norms coming into play?

 

As far as surrender value charges are concerned, we have been maintaining that we will be the least affected company. There are several reasons for that, one being, we are heavy on unit-linked products. Secondly, we have the lowest cost structure in the industry. Further, for our existing products, the surrender value that we are providing are much higher than the industry and are much closer to the revised guidelines. Due to the revised norms, the only new thing will be the first year surrenders, which we were not providing earlier. We do not foresee a substantial impact on the margins of SBI Life. Currently, our margins are the highest in the industry, despite being Ulip heavy. We continue to maintain our margin guidance of 26-28 per cent.

 

Do you expect a change in internal rate of return (IRR) for customers?

 

We had already changed our pricing structure for our non-par products in the middle of August. Going forward, we do not expect any repricing till there are further interest cuts.

 

How are you looking to tweak the commission structure for distributors?

 

SBI Life has the lowest cost structure in the industry, with our commissions being quite modest compared to many other companies. For now, we have not made any changes to our commission structure. We prefer to wait and see how the first-year surrenders pan out. If we notice any significant deviations from our expectations, we will reassess our approach.

 

Are you planning to adjust your product mix, considering its current heavy reliance on Ulips?

 

We have the entire product range. The Ulip heaviness is maybe a corollary of the good performance of equity markets. In the last 3-4 years, the returns have been good in the equity markets. We, as a company, feel that the protection requirement of the population is high. Hence, we want to sell more protection products.

 

A lot of life insurance companies have said that they would look to enter the health insurance space once the composite licence comes along. Do you have any such plans?

 

Our parent SBI has another subsidiary SBI General Insurance. They offer health products among several other products. So, as of now, we are not looking to add health insurance to our kitty. And, we have no plans in the future to do so either.

 

How can the insurance industry channelise more of household savings like the equity markets have done in the past 5 years?

 

For insurance and pension combined, the ratio has been consistent at around 17 per cent. Share of household savings towards equity markets has grown because of the deeper penetration of mutual funds and equity trading platforms in Tier-II and Tier-III cities. The kind of social security set up we have in India, I see a good potential for pension and annuity products. Globally, pension funds have the highest assets under management (AUMs).

 

What is your view on goods and services tax (GST) rationalisation on insurance premiums? 

 

The government has already formed a group of ministers for accessing GST rates and it is looking into all kinds of data and has collected information from the industry also.

 

How can insurance companies fund more long-term projects in India, especially infrastructure projects?

 

If you look at the government security side, insurance companies are the highest buyers for the 30-year, 40-year G-Secs that the government sells. On the corporate debt side, there is a dearth of long-dated securities. Secondly, there is no liquidity also in these securities. But we are fully ready. If there are good securities on the corporate side, we will definitely buy into that.

 

How do you plan to leverage Bima Sugam?

 

It is a very good initiative of the regulator. Bima Trinity – Bima Sugam as a marketplace, Bima Vaahak as a women-centric agency force in the hinterland, and Bima Vistaar, a combination product of personal insurance, life insurance, and property insurance. The Bima Sugam will be a unique platform which will be specific to the insurance industry. So, in that way, it will be different from other marketplaces where a plethora of product lines are available. This will be exclusive for the insurance sector and it will be available to all the players, distributors, sellers, insurance companies. We are preparing our products to launch on that platform once it is ready and running.

 

Insurance for All by 2047: What is your company doing to achieve this target?

 

India is in a very sweet spot. The way our economy is growing, the way our income level is growing, the way jobs are getting created, everything provides a huge opportunity to insurance companies. We are the youngest nation; this young nation has a different kind of aspiration. Their earnings are different, their spending habits are different, they are more aware about the products, and their financial literacy is also going up. So, all these factors put together provide a very good opportunity and everybody knows that we are not only under-insured; we have a very low penetration of insurance. So, the opportunities are huge. We are fully aligned with the government and regulator’s objective of insurance for all by 2047.