We will offer 8% interest per annum, if claims are not settled within 8 days: Vighnesh Shahane

Interview with CEO and wholetime director, IDBI Federal Life Insurance

Private life insurer IDBI Federal Life Insurance, which achieved break-even in the last financial year, and is now looking to expand its focus into newer channels like online, has launched a claims guarantee to better the service experience for policyholders.

In an interview with M Saraswathy, Vighnesh Shahane, the newly-appointed CEO and wholetime director, IDBI Federal Life Insurance talks about this business strategy and growth plans for the financial year. Excerpts:

 

The company posted a profit of Rs 80 crore in FY14, in the midst of a tough industry. How was this achieved?

 

We began our business in 2008, in the midst of a tough time and had to ensure that we were not profligate with money, had fiscal discipline and got our product mix right. We were selling regular long-term traditional products. About 80 per cent of our business is traditional. We have been serious about keeping business on our books. The profit has risen due to our strategy of selling long and traditional products, cost discipline and keeping business on books. We are hoping to sustain our profitable growth.

 

 

Claims guarantee is an initiative that you have started today. How will it benefit customers?

 

One of the biggest challenges that the industry faces is how to woo the customer back. Through our claims guarantee scheme, the company aims to settle claims in just eight working days. In case we fail, we will pay an interest of eight per cent per annum on the death claim amount for each day of delay beyond eight working days.

The nominees can also track their claims status through our website by entering the policy number and date of birth of the insured. The eight-day period is calculated from the date of receipt of all the requisite documents for deciding the claim. The interest payment is applicable for death claims of policies which have completed two years from the date of policy commencement up until the date of the death of the life insured. The payment of interest shall not be applicable where the death claim warrants investigation.

 

How has your portfolio stacked up after the new product guidelines?

 

The regulations around traditional and unit-linked policies are more customer-centric. We are in line to service our channels and customers. We have launched seven products and there are more in the pipeline which we are expecting this year. Among the seven, there are three group plans, apart from a unit-linked plan, guaranteed traditional non-participating money-back plan, child plan and a traditional participating endowment plan.

We do not want a flood of products because we need to retrain, re-calibrate, re-tool our sales team, get them used to selling a product before the next wave of products come in. Getting products is one thing and re-training agents is another. By the end of the year, we hope to have products including rural products, online space and group products. We are also looking at bundled products as requested by some distributors.

 

Bancassurance is your largest channel. Will there be efforts to focus on others like the online medium?

 

We are a bancassurance-led company with two strong bank partners with 2500 branches. Besides that, we have agency and direct sales team. We have made plans to foray into other channels like the online channel, group and broker space. In the online space, we want to have a strong back-end before we enter and launch products.

 

But there is much more that can be done in existing segments like bancassurance. We haven't yet fully tapped the customer interface channels with the banks, like call-centre, bank website and bank outbound sales team. We are predominantly in the branch-led sales.

 

Direct-selling channel as a proportion of total business has come down. Why is it so?

 

Norms related to a 'Do-Not-Disturb' registry has led hit direct business. This segment was supported by leads which tele-callers would generate. Direct sales force was the quasi-agency; they sold to their immediate market. Once this dried, they quit. Now, by feeding them leads and qualified prospects, we want to ensure longevity of these people on our rolls. We could do this through our website, work-site marketing or some form of tele-calling to make this a much more robust channel. Direct selling force is essential, since they work in a controlled environment and are employees of the company.

 

Any specific expectations for the sector from the Budget?

 

We expect the Budget to incentivise people to save for long-term needs and boost savings. Expenses, too, form part of the deduction limit of Rs 1 lakh provided under Section 80C. Such inclusion has led to a lower deduction limit for investment in life insurance policies, essential for providing financial protection to a large section of individuals. Tax incentives will help boost disciplined long-term savings behaviour.

We also expect that tax relief is given to proposals where the term of the policy is more than 10 years. This will promote long-term savings habits and benefit the persistency ratio of life insurers, too. Currently, pension/ annuity is taxable, though in the hands of policy holders.

There is also a need to increase the limit of tax deduction at source on annual commission payable to agents from the current Rs 20,000 to a minimum Rs 50,000. We also expect a re-think on the payment of service tax on insurance products. Especially, traditional single premium products which attract a high indirect tax make these fairly expensive for policy holders.