Bancassurance-led Canara HSBC Life Insurance is stepping up efforts to diversify its distribution network by expanding its agency and other non-bank channels. Managing Director and Chief Executive Anuj Mathur speaks to Narayanan V about the company’s distribution strategy, regulatory changes, product mix and growth outlook. Edited Excerpts:
You remain heavily dependent on the bancassurance channel. How do you plan to diversify distribution?
We started agency business in October (last year) and there also we have seen very good traction happening. We plan to add about 5,000 distributors within the next 6 to 9 months. We are also adding new offices. However, we are taking a very phased approach for the agency since there is always a cost attached to it. So, we are growing the agency in a phased manner, which is sustainable. Maybe in the next 2-3 years, we expect the non-banca business to be around 15% of our total business, of which agency would be around 5%. In addition to agencies, we have other channels like direct sales, defence and digital.
Is this diversification being driven by the regulator’s push to reduce insurers’ dependence on bancassurance?
I would just like to make a correction. The (Irdai) regulator is not looking at reducing bancassurance. Their main concern is affordability and the selling practices. I think the industry, and particularly us, actually has very robust sales quality parameters in place and a monitoring mechanism because of which our grievances are very low. Our 13th-month persistence is touching almost 86%. Our claim settlement ratio is also higher than what it was last year. These numbers reflects the way we sell. I don’t foresee any challenge on account of that (bancassurance). I think the banking channel is the best to reach out to Tier-3 and Tier-4 cities. So, I don’t think the government wants to curb this business. They want to promote it, but in an orderly manner.
Irdai is set to overhaul the distributor commission structure. Do you expect any impact on your business?
We would like to see the draft regulations before we really comment on them. And it’s not just about the commission. What the regulator is talking about is distribution reforms, which we welcome, and actually that will help us grow the business. If I talk about our business model, our commission rates are very reasonable, very moderate. So, we don’t foresee any major challenge to our business. In fact, it will be good because then the industry will be able to offer more affordable products to customers. Our total expense ratio is amongst the top quartile in the industry.
Your protection business grew 41% in the first quarter. What is driving this growth?
We are seeing good growth in our number of policies in retail protection. The number of policies has increased 19% year-on-year. It is also going to help us in terms of margin improvement. On the group side, our focus is more on Credit Life, which is the loan protection business. We have seen almost 41% growth in our Credit Life business in this quarter. For instance, through Canara Bank we have more home loan attachments for our Credit Life product. We also have a strategic focus on education loans (for Credit Life policies). We see this as a very promising segment because then you are insuring people in the age group of 20-25 who are taking education loans, and you have the entire life cycle of the customer available to you. There also we have seen our attachment touching 50%. While the ticket size may be lower compared to home loans, in terms of attachment we have seen good traction. We see this as a vehicle to onboard customers and then cater to their various needs from time to time.
ULIP share in your product mix fell to 36% from around 49% a year ago. Is market volatility driving this shift?
During uncertain times, when markets are choppy, customers tend to go for products with guaranteed benefits. What you have seen in the first quarter—and again it is a very short period—is that the unit-linked portfolio was 36% and traditional was 64%. We have factored in a 50-50 mix between unit-linked and traditional products.
Markets will remain choppy in this overall geopolitical environment. But the good thing is that people now understand the need for insurance. If you look at the last three months, despite the kind of uncertainties globally, business has gone up and our persistency has gone up. Even on the unit-linked business, we offer riders to our customers and we have seen very good uptake of riders in our customer base.