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HDFC Standard Life to avoid price war

Our Bureau

MUMBAI, Dec. 12

PRIVATE insurer HDFC Standard Life Insurance Co Ltd kicked off its business today with an announced intent to skirt price wars and focus instead on customer service.

``As a philosophy we won't get into a price war,'' Mr Deepak Satwalekar, Managing Director & CEO, HDFC Standard Life, said at a press briefing.

Initial business will centre on two basic products -- Endowment Assurance Policy and Money Back Policy -- with four disparate built-in riders capable of spawning 14 pre-packaged products for flexibility.

Currently the premia payable on its products are slightly less than LIC's rates. ``They may be 1-2 per cent lower,'' said Mr Nick Taket, General Manager (Finance) and Appointed Actuary, HDFC Standard Life.

``In the long run, I expect premia to settle at a competitive level,'' Mr Satwalekar said.

By March 31, 2001, the company has targeted sale of 25,000 policies through branch offices in 12 towns and service centres at nine others.

Citing strength in the distribution network, Mr Satwalekar said that on December 9, 97.5 per cent of the first batch of agents passed their exam, to commence work on the field. They were drawn from the top line of HDFC's existing team of 46,000 agents, i mplying thereby a convergent sales force selling a basket of financial products including those from insurance. At a later stage, HDFC Standard Life will recruit from outside.

Distribution of products would be through individual agents and corporate agents (essentially financial institutions such as banks). The company will have a Web page, not for selling products, but to service agents.

The data used to structure policies was sourced from reinsurers. Even as the company plans to build up its own data base, Mr Satwalekar said, HDFC Standard Life will be entering into an agreement with reinsurers, the same also critical to host high-value products. Reinsurance regulation norms are expected next week.

Consequently, the first three policies distributed today by Mr Keshub Mahindra, Vice-Chairman, HDFC, were worth Rs 1 lakh only. But true to HDFC Standard Life's intent, he told the first recipient, ``If you are unhappy at any time, ring me.''

The company has received 10 applications so far. HDFC Standard Life has an equity base of Rs 168 crore, with Standard Life holding 18.6 per cent.

Mr Satwalekar said that given the mandatory fund investment of at least 50 per cent in Government securities and 15 per cent in infrastructure, the balance 35 per cent permitted in approved investments like capital markets, would be where a difference to returns can be brought about.

HDFC Standard Life's market survey threw up service and returns to customer as equally important for market leadership, Mr Taket said. He maintained that the company's initial business will comprise people seeking additional policies as also first time b uyers. ``We don't think we will be entirely in competition with LIC as everyone contributes to expanding the market,'' he said.

As per rules, 92.5 per cent of profits will accrue to policy holders, the balance to shareholders. The industry has represented to Government to hike the latter share to 10 per cent. On the commission front, HDFC Standard Life, will stick to 40 per cent of premia -- as mandated by law -- for distribution to agents.

In Phase 2, the company plans to introduce unit-linked products and individual pension products. Currently only group pension products are permitted by law.

On non-life products, HDFC Standard Life is currently debating whether to be an agent or a broker.