SBI Life plans to cut single-premium policies’ share

SBI Life Insurance, which holds number two position among the private players in the new business premium space, is aiming to give ICICI Prudential, the number one player, a run for its money by expanding branches, increasing number of employees and leveraging its relationship with the State Bank of India to increase bancassurance. M N Rao, managing director and CEO, discusses with DNA on the company’s strategy and prospects. Excerpts from the interview:

What steps you are taking to reach the number one position?
We will be expanding our branches. We are one of the few insurance companies which added about 135 branches last year.

Now we have 635 branches. Our staff strength increased from 6,000 to 7,300 in fiscal 2011. This year I already have approval from Insurance Regulatory Development Authority for opening 74 branches. Our staff strength should be around 8,000 to 8,250 by the end of fiscal 2012. We will also leverage our relationship with SBI further to increase bancassurance. We hope to have a 35% growth in topline and overall we should be growing around 32% in total gross premiums. In the new fiscal we would like to have a closer look at single-premium policies that are coming. Not that these policies are not profit-making. But there has to be a share of single-premium policies beyond which we would find it slightly disturbing. We would like to have a greater share of
regular-premium policies than single-premium ones. The share of single-premium policies went up to 46%. We would like to bring it down to below 30%.

Are you happy with your annual results?
I am only satisfied with the topline growth because our topline growth has been only 7% whereas my targets were higher. But I have far exceeded my targets on profitability, AUM (asset under management) growth, expansions, staff addition, bringing down the opex ratio and I have also improved the persistency ratio.

There are talks that under the revised norms, the 4.5% guaranteed return portion in a pension scheme may no longer be mandatory. What are your views on it?
If you look at the number of pension products available today we have a pension product which is a single-premium product in the private player insurance space. LIC is the only one having a regular premium product. I believe regulators are looking at relaxing the regulations to make it possible for us to offer more products, especially in the regular premium space. This particular discussion has been going on for quite sometime and we do hope that in the next 1 or 2 months the new guidelines come up for pension products. The share of pension in the overall business has come down drastically in the last few months. In our case, SBI banking channel contributes close to 38% to our total business generated.

What are your views on open architecture system (banks allowed to sell insurance policies of more than one insurance company)?
I feel we should take some initiative by which it becomes remunerative for the banks to sell insurance products. Once it becomes a necessary component, then we should look at opening the doors for multiple insurance companies to sell their insurance products through banks. But currently I think we should continue to have one bank selling products of only one insurance company.

Did you also have a hard time selling Unit linked insurance policies (Ulips) after the new Irda guidelines? Did you suffer any losses?
No, we didn’t suffer any losses. In fact we continued to be profitable across pension and Ulip products. We had an advantage of having the lowest opex ratio, hence we were able to generate fair profits and as you would see the total profit figures are 33% higher than last year’s. Overall, Ulips contribute almost 69% as against 31% coming from the traditional products.

You have completed 10 years of operations. If you have to sum up the journey so far then what all were the biggest challenges and achievements?
It has been a satisfying journey. We have been the first insurance company to become profitable. In the last three years we have not asked for any capital infusion. Productivity of our insurance advisors is about two to three times than a lot of players. The amount of business that they (insurance advisors) garner is significantly higher. We have the lowest operating expenses ratios. The total expenses ratio that we have has also come down.