ICICI Prudential Life Insurance Ltd’s value of new business (VNB) is expected to grow by 23 per cent in FY23, in-line with the company’s guidance of doubling its FY19 VNB by the end of the current financial year. In Q1FY23, the insurer’s VNB grew 32 per cent to ₹471 crore.

“From an overall performance perspective, we are quite satisfied with our VNB metric and we do believe that we are on track to achieve the year-end target,” MD & CEO N.S. Kannan said in an interview with BusinessLine.

Kannan said in the coming financial years too, ICICI Prudential Life will focus on growing the absolute value of VNB, at a rate equivalent to that of the industry growth--seen at around 15-20 per cent.

ICICI Prudential Life posted a net profit of ₹156 crore for Q1FY23 compared with a loss of ₹186 crore a year ago. Profitability was aided by on-year new business premium growth of 24 per cent, improvement in the persistency ratios and a significant reduction in Covid-related death claims, Kannan said.

In Q1FY23, the insurer received Covid claims of ₹16 crore pertaining to deaths that happened in Q4FY22, Kannan said adding that claims related to deaths during the reporting quarter were only nine. Against these claims, the insurer has carried forward Covid-related provisions of ₹24 crore into FY23. “We will wait for another quarter or so, and see whether any claims are emerging, before deciding to bring it down,”Kannan said.

Product mix

A key driver of profitability for the insurer has been the strong growth in the high-margin protection segment, which grew 22 per cent on year to ₹330 crore in terms of APE (annualised premium equivalent). Protection products comprised 22 per cent of the insurer’s product mix, an increase from 17 per cent in FY22 and 9 per cent in FY19.

Within the protection business, though, the retail segment has faced hiccups owing to supply side constraints, Kannan said, adding that to off-set the impact, the company has been focussing on growing the group term insurance and credit life segments.

”Those have come to our rescue as a part of the overall protection segment. In the medium term, we do believe retail protection can grow, at least from Q3 of this year, and It has the ability to get to 22-25per cent of our overall product mix,” he said.

Currently, the three segments -- retail, group and credit life -- broadly comprise one-third each of the protection business, but Kannan believes that the percentage of the retail segment will grow within protection, once Covid-related disruptions are behind the industry.

Annuity products, while a small portion of the portfolio, too have been a high growth segment for ICICI Prudential Life Insurance -- growing 69 per cent on a small base to ₹98 crore in Q1FY23. This led to the total share of annuity products rising to 6.4 per cent from 4.0 per cent last year. Kannan expects the segment to continue growing at “high double digits” in the coming quarters, aided by the insurer’s decision to sell annuity products also to customers in the 45-55 year age bracket rather than only customers that are nearing retirement.

“What we have also done is that rather than looking at single premium annuity, we have launched the regular premium annuity. That has taken off quite well,” he added.

Customer focus

In an effort to improve its persistency ratios -- a measure of customer stickiness -- ICICI Prudential Life Insurance recently launched ‘humanoid calling’, a two-way conversational AI bot, with speech recognition capability. Deeming the platform “very helpful” during the pandemic, Kannan said it allowed the insurer to make 50,000 renewal calls per hour on average. This helped improve persistency ratios across segments, with the 13th month persistency rising by 90 bps to 86 per cent and the 49th month persistency by 160 bps to 65 per cent compared with FY22.

Focus on technology and digital channels has also aided customer experience and thus improve persistency, Kannan said, adding that currently about 82 per cent of the insurer’s premiums are paid digitally and one in four transactions are conducted through the insurer’s mobile application.

Regardless of the growth of the digital channel, the key focus area for ICICI Prudential Life in terms of distribution will continue to be on the agency channel, which currently comprises around 23 per cent of the APE (annualised premium equivalent).

“Our internal target is that at least 30 per cent should come from agency. We have more than 200,000 agents today and a partnership with 30 banks,”Kannan said, adding that the share of banks other than parent ICICI Bank has risen to about 15 per cent of the total distribution from 4 per cent in FY19.