Speaking to Advait Rao Palepu, IDBI Federal Life CEO and Whole-Time Director Vighnesh Shahane talks about the future of the company given the acquisition of IDBI Bank by the Life Insurance Corporation of India.
A: Over the past 15 months, there has been constant news that IDBI Bank has been in need of capital infusion. The shareholders had decided that there would be a stake sale in the company and they would get a price discovery for the entire company also. However, possibly because of the advent of the LIC infusing some capital into the IDBI Bank, it is on the back burner for now. I don’t hear about it from the media now with as much intensity as I did maybe two to three months back.
Q: What are the concerns internally if the process for stake sale were to continue?
A: There has been no official communication from the shareholders. As an employee, there could be a lot of anxiety on the job front if there was a stake sale to another insurer. From an employee standpoint, it wasn't the ideal or optimal scenario, but from a shareholder point of view, it was probably the need of the hour for them.
Q: The company has turned profitable, wiping out all accumulated losses, within ten years of commencing operations, could you tell us what factor is contributing to the growth?
A: We were at the number 10 spot in terms of individual new business premium in September 2017 as compared to the number 17 spot in the previous year among private life insurance companies. This last year, we had a spectacular year despite it being one of the most challenging years for the company. We had a growth of 18 per cent in terms of total premium and doubled our Gross Written Premium in three years. And the cherry on the icing is that our profits grew by 94 per cent to Rs 1.01 billion last year. Our persistency ratios, in all five buckets, are in the top quartile and we are the only company with more than 50 per cent of our customers on our books after five years.
Q: Can you talk about how the transition to digital has been for the company, given its traditional reliance on its banking partners (and promoters)?
A: Digitisation is not vertical; it is horizontal as it cuts across all aspects of our business. We are predominantly a bancassurance company as 85 per cent of our sales come from that channel. The company is growing the agency distribution in a smart and calibrated way and have invested in the online space. It is always good to have multiple distribution channels as an insurance company so that there is no risk on any one area. On the digital front, we have been ‘late comers’ but the advantage is that we got to learn from others' mistakes, and in the last 16 to 18 months we have made a considerable movement. We are using analytics to check claims and persistence and are reducing our turn-around times from 21 days to 4 days, when it comes to issuing policies.
Q: The past year has been good for the life insurance industry and for IDBI Federal Life, what are your thoughts on product innovation and servicing customers better?
A: At the end of the day, the customer is king and India being an under-insured market, protection plans should be sold first. Insurers are moving towards protection products because it provides higher Value of New Business and margins are better, with higher profitability. Insurers should focus on doing a complete needs-analysis of their customers. We must recommend the right financial solutions, depending on the customer's appetite for risk, their need for protection or savings, their time-horizons and the life-cycle needs. In insurance, this could be savings, protection or ULIPS.Term plans are commoditised and so there is only so much that an insurer can do. Creativity in insurance could lead to complexity, so the industry should focus on simplicity for the customer.