IndiaFirst Life eyes Rs 100 crore

Being the 23rd Indian life insurance company is not easy. But being part of a three-way joint venture with big banks like Bank of Baroda and Andhra Bank and UK-based Legal & General as shareholders, IndiaFirst Life Insurance Company can borrow from their market learnings. P Nandagopal, CEO, is an old hand in life insurance, who has worked with Birla Sun Life and is ex -CEO Reliance Life. He talks to DNA Money on the company’s immediate plans and also challenges in competition.
 
Most private life companies have registered a de-growth in the first six months. Is this the right time to get into the life insurance market?
That’s true....some of the life companies have registered a fall in profits but some like SBI Life and Canara HSBC OBC Life have fared well. It’s much about having to do with an efficient and consistent distribution model. For us, I feel it is a strategic time as things are becoming competitive. For any business it is preferable to enter at a tougher time. Knowing that the industry is growing at a particular rate, you do not fix unnecessary expansion plans and always strive for the better.

Although it’s just the beginning, what kind of targets are you looking at?
We would be having a board meeting in January and discussions are on. This would decide on a vision and business plan for the company over the next five years. But having just begun, we aim to achieve a premium of Rs 100 crore in 100 days, which is coinciding with the close of the financial year.

What kind of products are you selling?    
We have launched products in three segments — savings, education and retirement. All these are compliant with the new Irda regulations on capping charges. In fact, we even filed and got the products approved even before the regulation was introduced. Moreover, all three products are for 15 years with an exit option after 5 years. There has been a uniformity which has been built into all the products.

Being a new player, do you see a pressure on your margins, now that the IRDA caps on charges have been introduced? 
This is a practical cap and makes it easier for the customer. For companies, which are growing very fast, it may prove a little difficult. Our strategy is to ride the wave of growth but not to burn more fuel than required. Artificial growth for the short-term is not sustainable.

Would IndiaFirst be primarily a bancassurance player and if so, would you bank on low operational costs like say SBI Life or so?
Predominantly, we will be a bancassurance player and two-thirds of our business in 5 years will come from this channel. But we will start an agency channel next year. Yes, we do have the potential advantage of a low-cost distribution network but need to execute a cost-efficient strategy. Currently, out of 4,500 branches, we will be using 1,500 branches of both the banks, who are our promoters as well. Cost savings are important. We will have our own standalone branches of around 50 from the next fiscal. In fact, we will have our corporate office in the western suburbs of Mumbai, which has the lowest rates. 

Any plans to infuse capital and what about break-even?
We have a paid-up capital of Rs 200 crore and will take up any plans to infuse capital after the business plan is approved. Normally, a life company takes 7-9 years to achieve breakeven. It depends on what our business plan says, but we could break-even in the fifth year. Ideally a company has to bring down its costs to less than 20% of the premium by the fifth year to achieve a break-even.

Are you planning to disclose embedded value for the company?
Yes, we will declare all required benchmarks like penetration, persistency ratios. We will go beyond that towards disclosing benchmarks in financial, operational and market efficiencies.