Focus will be on growth over margins for our APE: ICICI Pru Life MD

From an overall perspective, we are going to focus on growth over margins for our annual premium equivalent (APE). The focus is on growth and getting the customer-product-channel tripod right. Our balance sheet is very good, products and channels are diversified. That tripod tightness will open up great growth with risk and prudence because we have zero non-performing assets. Once you are overly focused on margin, then product mix takes a slightly higher precedence than customers. Now that is fixed, the next focus has to be on customers.

We don’t give forward-looking guidance but the key point is penetration levels are low. It is inconceivable that only 2 per cent customers require life protection and longevity planning. It is still a latent and not explicit need. But we are seeing some shift where people are saying they require protection and we’re seeing more organic traffic on digital channels. We are basically driving four things, first is the use of data and analytics for onboarding and underwriting. Second is the needs of the customers and what products are required. We are quite diversified on products but if there are any gaps, then we will come out with products. Third is digitalisation of the full customer lifecycle management. Fourth, because we are still a very intermediated business through agents and partners, we go deep in partnerships and do real capability development of partners so that they are able to sell correctly.

We have agile capability and if there is a gap we can fill it. For example, with the taxation change we were able to immediately come up with constant maturity ULIPs. We are striving to have all categories of products. And the customer segments are very different so the challenge is to keep broad-basing all kinds of customers. Our strategy and approach would be to develop channels, which cater to the all needs.    

Yes, it (growth) is getting adjusted. There was a time when Section 80C used to be a big driver for the insurance sector. Now it’s forgotten. Maximum business used to happen in the last two months (of the fiscal year). But there is no alternate or substitute (for long-term investments). What is also happening is policies are getting split. A person who was doing ₹6 lakh policy is now splitting the investment into two policies through maybe different family members.

Our products are 10-15 years. If you annualise the margin, it is 2-2.5 per cent every year. VNB is net present value (NPV) of all cash flows. When you annuitise, it is quite normal. Also, margin is a function of product mix which is a function of customer mix multiplied by channel mix. If the channel has a young population and you force annuity products, it will hit persistency. Therefore, the opportunity is to develop different customer segments for different kinds of needs and products through different kinds of channels. That’s the only way in which margin will be managed properly.

No, we should increase. We certainly have an aspiration to move up because now we are very well set with diversified products and channels — 39 bank partners, 400 plus non bank partners, heterogeneous set of channel partners.  The aspiration is for the correct way of growth — sustainable, durable, good quality growth.

It’s a great aspiration because it will force all of us to rethink our business models and force the regulator to be more proactive in enabling. It’s a great rallying force for the industry. Within the risk adjusted framework, we want to do insurance for all. For risk adjustment, we require good data, a health and life put together so that we can underwrite well, and better methods of income estimation. People may qualify for a lesser sum assured and differential pricing but if there is a segment which is slightly lower margin but gives you great growth and is VNB accretive, of course we will do it.  

Composite licence will come when it does. But nothing prevents a large group like ours, where we have general and life insurance, to come up with a composite product. Now the challenge is learning. These are long gestation, so now we are developing the channel, and investing in training and customers. Health is being underwritten and life by us. There is a common team that looks at the unified underwriting.

In some ways, it is like a composite licence. But composite license is a shareholder issue. As management, our focus is on customers. If we can satisfy a customer need then we should come together and do that.