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SBI Life Insurance has been one of the few players in the industry to declare a maiden dividend within 10 years of operation. Atanu Sen, MD & CEO, tells M Saraswathy about the strategies to build on this momentum and plans for the future. Edited excerpts:
What is your view on the recent Cabinet approval for rise in the foreign direct investment (FDI) limit for the insurance sector to 49 per cent?
Section 6AA of the Insurance Act said the share of the Indian entity was to be brought down from 74 per cent to 26 per cent over a period of 10 years.
Since the FDI limit was at 26 per cent, foreign institutional investors (FIIs) could not somehow come into the picture. Now, looking at the FIIs, with their expertise in valuation and their interest, 49 per cent FDI would be a welcome move. This is especially beneficial for many insurance companies that will be requiring capital — mostly the smaller and newer ones.
SBI Life declared a maiden dividend this year. Do you expect your growth momentum to continue?
The firm has not looked at any capital infusion. In fact, both our equity partners, SBI and BNP Paribas Cardif, were happy to note that an insurance company had declared its maiden dividend within 10 years of its operation. We are earning profits for the past four-five years. It is a healthy situation.
Are you looking at coming up with an initial public offering (IPO)?
An IPO would be a function of the FDI and valuation. As of today, we are comfortable with the capital and are not looking for a public issue. In the past five years, we have not asked for any capital. We are one among the large companies that are growing. When the market gets better, we would take a call on whether or not we require capital. It is in the realms of future possibilities; we have no such plans now.
Your current product mix? Is there an appetite for Ulips?
As of today, the mix is 60-40, where 60 is traditional and linked is 40.
Linked products used to constitute a larger share in the last two to three years. But we have made a conscious course correction in the last couple of years, and so it has come down to 40 at present.
Linked products are a function of the market. If the market is doing well, there is a lot of appetite for linked products. As of today, if you sell the product well, there is an appetite for the product. I think 50-50 would be the ideal mix.
What will be the new products this year? Our focus would be across the board. This would include pure term product, monthly savings product, pension product and linked product. The monthly savings product has already come. So is the linked product, and we are expecting these shortly. Customers would like to have a bouquet of products. There would an appetite for different products. Pension is one kind of product. Monthly savings product would appeal to the 30-40 age group and linked product to the younger generation.
With the latest product guidelines proposing a higher agent commission, do you see a corresponding rise in premiums?
Premiums would not go up. If you want to benefit from the market, it has to be ensured that the products are so designed and market is so developed that premiums to the customers are competitive. That is the long-term objective. Though agent commissions have been increased, the companies will have to be much more competitive and will have to bring down their cost of operations and be more efficient in business.
Would there be a thrust on micro insurance products by the company with low premiums?
If you look at the new micro insurance guidelines, they say the number of such agents that you require in urban areas is about 1:1. However, there is more leeway in rural areas. So, the thrust will be more on rural areas and micro insurance. In micro insurance, too, SBI Life has products that can ride on the strong bancassurance channel that we have. I believe micro insurance can be bundled with other products. Though premiums may be low, the models have to be there. Cost of operation and cost of distribution should be such that you make money.
What is your opinion on the bancassurance draft guidelines?
Bancassurance guidelines are very positive. One is for the banks which have a large number of branches, the corporate agency remains. As of today, it is the insurance company which is responsible first and then it is the corporate agency channel. Then the question is of the broker channel, where the bank will have to take a call, as the fiduciary responsibility is with the bank. If there is any customer-related enquiries and issues, then the bank is responsible. The third channel is very interesting. They say you may have a minimum of two or maximum of four as partners who would be banks and smaller banks that do not have their own insurance company. That is very attractive. Insurance companies can also be partners. SBI Life partners with SBI, with the latter as the corporate agency, and they will continue to do so. But then you also look at other banks which are looking at it. It is a win-win synergy for both of us.
Will the new ‘use and file’ reforms be beneficial? Do you think the new product guidelines would lead to refiling of products?
Irda has mentioned 18 standard products, and matter is still in a developing state. Irda is working closely with actuaries of companies and product developers for this. I think, when they come, they would be standard products that could be sold to the general public. People will have the confidence that no mis-selling has happened. So, if one product conforms to the guidelines, it can be directly sold, after the actuary has had a look at it. There would also be ‘file and use’ products to add to the differentiation and cater to the niche market. For this, they would have to take a call within 30 days. This is a positive step, and we can know whether the product is acceptable or not. We may have to refile some products, as it is a dynamic scenario, but we would get a decision within 30 days.