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SBI Life Insurance is the first private life insurer to declare dividends to its shareholders, in an industry that has still some distance to go before breaking even.
Atanu Sen, Managing Director and Chief Executive Officer of SBI Life, feels that the product revamp guidelines released by the insurance regulator will compel life insurers to re-file many of their products. In this backdrop, top-line growth for the life insurance industry will be a challenge this year.
Edited excerpts:
What are your views on the product guidelines released by the Insurance Regulatory and Development Authority (IRDA)?
If you look at the product guidelines that have come now, there are certain challenges, particularly in the traditional non-par index-linked products and the highest-NAV-linked products. Also, a number of products have to be re-filed and the space vacated by these products will have to get filled by new products.
When new products are launched, there are a lot of innovations that take place but only a few products get accepted and sold.
The guidelines are much more customer-friendly so these changes are required, but they can be phased out a bit. As for new business growth, earlier if you were looking at 10-12 per cent, that may come down to 2-3 per cent if the regulations prevail in the current form. So as far as this year is concerned, top-line will be a challenge for the industry.
Do you feel the timeline given by IRDA to re-file the products is enough?
The industry may come out and file products but it will be a bigger challenge for the IRDA — looking at all these products and getting them approved and sending them back to us.
The new business premium collection has dropped for both industry and SBI Life. Do you see this as a worrying trend?
For us it is not a worrying trend. New business premium consists of single premium and regular premium. Most of the large companies have moved from single premium to regular premium. If you have single premium then it is much more volatile, because you drive the top-line for that year. Next year, if the products change or the economy does not support you, your business will fall sharply because you don’t have a renewal kitty which is coming in.
But if you look ahead, the renewal premium for all the companies will grow and that will take care of the top-line growth. If you look at the annual premium equivalent (APE), companies are growing at 15 per cent which is very healthy for the industry.
Are you looking at any changes in the distribution model?
If you look at the productivity of the agency channel of SBI Life it can compare with LIC’s. No other private insurance company has an agency channel which is as productive. But bancassurance channel is definitely more productive as we have an inherent advantage with State Bank of India and its associates’ 20,000 branches. There is a humongous possibility there.
Even two years ago, if you looked at distribution you would have found two-thirds of the premium came from agency and one-third from bancassurance. Today it has become 50:50 between bancassurance and agency channels. So bancassurance will be the prime channel. That is not to say that the agency channel will shrink. It will, not in overall terms but percentage-wise.
The number of agents is still around 88,000 and active agents are around 30,000. If you look at the new product guidelines, the commission structures have also undergone a change and the livelihood of agents would be a challenge. We could see a higher attrition rate among agents. We need to ensure that the agents find it attractive for their livelihood.
There could be two categories of agents if you ask me — those who can sell simple products and those who can sell the more complex products. Different types of examinations can be there for both.
Do you have any capital infusion plans?
SBI Life turned the corner very quickly in 2005, and for the last 4-5 years we have not required any capital and actually for the last two years we are giving dividends to our parents, both SBI and Cardiff BNP Paribas. So in the near future we won’t require capital. If you look at our solvency ratio it is much more than two, when 1.5 is the industry benchmark.
Secondly, the growth itself is not expected to be very fast, so I don’t think we’ll need capital but we’ll be giving some to our parents.
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