The life insurance industry is expected to record a growth of around 17-18% by the end of March and continue its growth story in the years to come. The recent decisions of the insurance regulatory authority will benefit both the customers and the long-term interests of the insurance industry. Nageswara Rao, CEO and managing director, IDBI-Fortis, in an interview with FE ?s R Ravichandran, says the growing number of branches and the expansion in the network of agents will help in the company?s growth story. He also talks about the entire industry and the company?s perspectives. Excerpts:
What is your overall perspective of the industry and its growth momentum in the current financial year?
The second half of the fiscal saw a significant growth in insurance sales and the market has recovered from the effects of global meltdown and the consequent slowdown in India. Most economies are now showing signs of a recovery. The last quarter was the key period for the insurance industry. The momentum is now present, though a little moderate compared to last year. The life insurance industry?s premium grew by 16.49% during April-February 2010 and touched Rs 84,000 crore. While LIC has grown by 23.78% during the period at a little over Rs 54,320 crore, private life insurers grew by 5.11% to net 29,571 crore.
As far as IDBI Fortis is concerned, till February, we witnessed a growth of over 80% in total premium, compared to last year, and 27% growth in new business premium?significantly ahead of private life insurance companies, which in aggregate grew at 5%. We are now looking at doubling our agent network and also adding new branches in order to increase our branch strength from 35 to 55.
What are the positive and negative aspects for the insurance after the Union Budget?
The Budget has rationalised service tax on ULIP charges and service tax is now applicable only on fund management charges like in the case of mutual funds. This has made ULIP products cheaper and more attractive to customers. It is a positive development.
How do you view Irda?s recent diktats on ULIP-related issues/compliances?
Irda has introduced a cap on the charges of ULIP products. The limit is 3% if the policy term is less than 10 years and 2.25% if the policy term is greater than that. Insurance companies provide protection to customers, both financial protection as well as risk protection. These limits ensure that the protection is available to customers at a fair price. Compared to other avenues of saving and other protection available to customers, these limits are very competitive. They make ULIP attractive in the long run and help in building volumes. At the same time, the industry faces the challenge of adjusting to reduced margins and needs to cut costs and increase productivity and volume to protect its profitability. So, Irda?s move has been vastly beneficial to customers.
Where do you think IDBI-Fortis stands now?
Our journey so far has been very exciting. We were the first new life insurer to reach the first Rs 100 crore and have closed last financial year with over Rs 318 crore. In the current financial year (from April 2009 till February 2010) we garnered Rs 284 crore. Since its inception till February 2010, we have insured over 1.72 lakh lives and the total sum insured is Rs 6,255 crore.
What is your target for the current financial year ?
Our total premium has grown by 80% till February over last year and crossed Rs 400 crore. Also, in new business we have recorded Rs 284.74 crore as first year premium, with a growth of 27% over last year. The policies issued so far this year are 72,960, marking a 23% growth over last year.
What will be your growth strategy for the next financial year?
Two-thirds of our business comes from our parent banks?IDBI Bank and Federal Bank, which have also been expanding and have set up over 400 new branches and increased their customer base. As far as our products are concerned, we launched the flagship product Wealthsurance, which gives the option of investing in any of the 12 investment options across the risk-return continuum and allows the customer to protect this investment with a wide array of 8 insurance benefits spanning across death, disability, hospitalisation and critical illnesses. All this was packaged in a low-charge structure which made it extremely competitive. Months later, the trend today is to create low-charge products, owing to the new Irda norms. Going forward, we intend to bridge the gap between products and create a greater portfolio of products.