As Private Sector Penetrates More Cities, Insurance Awareness Will Improve

Updated: Aug 30 2003, 05:30am hrs
Shivaji Dam, managing director of Om Kotak Mahindra Life Insurance Company, is busy trying to standardise the process of selling life insurance policies. Mr Dam, who was one of the first employees to join Kotak Mahindra Finance Limited (KMFL) in November 1985, has been associated with the groups investment banking, corporate finance and car finance businesses.

In 1996 he became the executive director at KMFL and subsequently handled the groups insurance venture from scratch. He took over as managing director in May 2001. In an interview with Papiya De of The Financial Express, Mr Dam talks about why Om Kotak Mahindra, unlike its competitors, is taking a long-term view on the insurance business.

India is considered to be a highly under-insured country, how do you think participation of the private sector has helped in improving the state of things
India continues to be an extremely under-insured state. Both the private sector as well as the Life Insurance Corporation of India (LIC) are making immense effort to create awareness. We operate in 30 cities and we have organised seminars and appointed advisors to make people understand the importance of taking policies. As the private sector penetrates further and moves to other cities, insurance awareness will definitely improve.

What kind of growth has the insurance sector witnessed last year Do you see a marked improvement in performance this year
Strangely, last year the overall insurance industry in India saw no growth. The private sector in its first year had mopped about Rs 300 crore of premium, roughly 2 per cent of the total market. In the second year, it bagged close to 8 per cent by garnering Rs 1,000 crore of premium. In the first three months of this year, the private sector has captured a 10.5 per cent share of the market, as premium income is Rs 225 crore compared with LICs Rs 2,004 crore.

The private sector is likely to do a combined business of Rs 2500 crore this year. My calculations are based on the fact that the business one does in the first three months of the year, is roughly 10 per cent of the annual business.

However, the industry has changed rapidly and it will be sometime before there are marked changes in the selling patterns. Most of the private players are concentrating on acquiring agents. We have to realise that almost 75,000 to 1 lakh people have joined the profession and there is a huge leaning curve ahead.

I believe, it is only by the fourth or the fifth year we will realise what is the right thing. Everything is on an experimental mode right now.

What is the strength of your agency force
We have about 4,500 agents compared with 3,800 last year. By the end of this year we should have about 10,000 agents. We are far more selective than many of our competitors largely because we believe that life insurance is all about long-term relationships. We believe in quality and not quantity, and want to focus on the productivity of the advisors and get a particular volume of business from each of them.

Most private insurance players harp on service being their USP, how do you differentiate your services
Currently we are focussing on implementing a standardised procedure of selling life insurance products. As a first step, we try and assess the lifecycle needs of human beings and find out what needs to be done through our fact finding and need analysis forms. These documents, in a way, standardise Om Kotaks way of selling. We train our agents to try and talk about why a potential customer requires insurance, we train them to make people become aware of risks. We try to create a link between his needs and our products. That is not to say that we have already implemented the process completely, but we are slowly progressing towards a more credible way of selling policies.

What would you say is a preferred model of selling life insurance productsis it bancassurance or the agency route
Both are tested models and have proved to been successful under different circumstances. My take is that bancassurance is likely to be successful with easy vanilla products, catering to an elite clientele.

Is it true that you are concentrating on western India Why
Kotak is a better known brand in this part of India. We have decided to focus on the six big cities and the first 40 cities in western India. We are currently in five cities in Maharashtra and 10 cities in Gujarat. We believe that Kotak understands the local sentiments and can thereby customise its products to local requirements.

How have you benefited from your alliance with Old Mutual
We have acquired the domain knowledge from Old Mutual. Our actuaries and underwriters are from our partners. They have helped us create our IT architecture. We also have trainers from Old Mutual. Out of the 700 people we have in Om Kotak, only 10-12 are with an insurance industry background. There is great learning curve ahead.

What kind of premium income do you expect to close this year with
Our premium income stood at Rs 35 crore last year. This year we expect it to grow to about Rs 100 crore. This growth will be essentially driven by distribution, as we plan to increase our agency base from the current 4,500 to Rs 10,000 by the end of this year. We also have a network of 50 corporate agencies. We also have managed to get fairly large group policies. We did a large group policy for 10,000 employees of Oil India for Rs 3.2 crore.

When do you see yourself attain breakeven
Breakeven would take about 6 to 7 years. I like to believe that I am on a marathon innings, and the in the first two to three years I would like to concentrate on building the blocks.