We will focus on building distribution and organic opportunities: ICICI Pru CFO

How is the life insurance industry doing amid the slowdown? What are the expectations for recovery?

April was the toughest month for the industry, but every passing month has seen an improvement. We are getting far closer to what we were in the same period last year. Also, whenever there are periods where life or health is at risk, awareness of consumers towards insurance as a category goes up dramatically. It was always the situation where insurance was seen as a push product, but this environment become a nudge product and, hopefully, sometime in the future, it will become a pull product. For the industry as a whole, I think this period has been extremely positive. Business is a short-term issue, but purely from an opportunity and environmental factor, this has been a very strong and positive phase. We are very close to normalcy, and I expect we will do much better in the next quarters.

In April 2019we articulated our aspiration to double our value of new business (VNB) over a three- to four-year period, which meant a 19 per cent growth for four years. We took a four P approach to this – premium growth in savings business, protection business growth, persistency, and also productivity. VNB grew by 21 per cent in 2019-20, and we believe we can reach the end goal in the next four years. Given the disruption in the first two quarters, the focus on strategy has been enhanced to include technology. It has to work as a bridge to convert a physical handshake in the past to a virtual handshake. Second priority is on the balancesheet risk. Equity markets have been very volatile, and due to policy decisions, interest rates have gone down very sharply. We, as a company, do not have a lot of guaranteed products, and when you run a large balancesheet it is a risk, which is difficult to manage in this market environment.

Along with the four Ps, we have added these two dimensions of technology to help our distributors and risk management, which will ensure that stakeholders’ capital and policyholders’ money getutmost importance.

Risk is always something specific to an organisation, and it is very hard to say that risk across organisations is very similar. So far, our capital regime is based on the same standard applied to all organisations. What the regulator is trying to do now, which is in line with many global jurisdictions, is to look at capital position and capital requirement, keeping in mind the specific risks of organisations.

That differentiation will help the regulator monitor and manage capital positions of companies far better. The entire industry needs a lot of capital for growth, and if the regulatory move is able to redeploy capital within organisations and help companies to focus more on growth, our hypothesis says it will help improve the penetration of insurance by taking away some of the constraints as far as capital is concerned.

The organic opportunity for insurance in India is still very sizeable and we are not yet a saturated market where companies have to necessarily seek inorganic opportunities. Normally, whenever there are difficult periods, there are certain promoters who are in stress. Each of these will have to be looked at case-by-case to see if it makes sense to us or not. At the end of the day, our core belief is that organic opportunity is what should take management time more and inorganic opportunity if it comes our way and if it makes sense, we will evaluate. Our focus remains on building distribution and organic opportunities.

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