Employing tricks of the trade

He is an old fox in the financial sector. But was initially foxed by the intricacies of life insurance sector. However, Mr.Shivaji Dam,the managing director of the pious sounding OM Kotak Mahindra Life Insurance Company Ltd, is quick to imbibe the trade tricks. "This field is really interesting and intriguing," he says.

Like most other new life insurers Mr. Dam is sticking with the time tested products like endowment, money back and single premium policies with usual riders/additional covers. In addition OM Kotak also offers the facility of keeping a policy alive even if the premium has not been paid.

What one can fault him is his failure to keep with the times in terms of customer friendliness. At a time when competition is offering free-look period ( the period within which a policy holder can return the policy and take back the money), OM Kotak is in
sync with the public sector Life Insurance Corporation of India (LIC).

Similarly while competition is defining the surrender value upfront and offers guaranteed returns and sends mobile medical clinical laboratories to do the medical check before enlisting a policy holder, OM Kotak is found wanting in these aspects.

Responds Mr. Dam, "Our software package doesn’t support free look period facility. Further it is not possible to define the surrender value upfront as it depends on the returns that the policy holders earn on their policies." In the same vein he adds, "In these days of down sliding interest rates, guaranteed returns are a risky proposition."

However Mr. Dam cannot brush aside the market condition and competitive scenario. As a matter of fact, heading the Rs. 150 crore equity based OM Kotak- a 74:26 joint venture between the Rs.2, 000 crore Kotak Mahindra Finance Ltd and Old Mutual Plc, UK, an
international financial services group- he has a tough task ahead.

At a conservative estimate 15 new players will be there in the life insurance sector. Currently there are nine. Amongst them are the formidable LIC and SBI Cardiff- their mere names spell safety for the insuring public. For instance while the new players
spend heavily on media campaign, the actual benefit of the same is enjoyed by LIC (See Private players `insure’ LIC’s business).

Further there are companies like Birla Sun Life strikingly different in its products and approach. (See Birla Sun Life Insurance: refreshingly different)

As per initial plans Mr. Dam hopes that the company would break even at the end of seventh year. As regards immediate target, he hops to sell 30,000 policies for a total sum assured of Rs. 300 crore and in the process earn a premium income of Rs. 15 crore.
Till date OM Kotak has sold 2,000 policies.

So how does he plan to achieve the targets-self imposed and the ones levied by Insurance Regulatory and Development Authority (IRDA), namely the rural push?

"We have chosen some villages in Maharashtra and will be selling our policies there," explains Mr. Dam.  Chips in Mr. Treman Ahluwalia, chief marketing officer, "We will also tie up with NGO’s to sell policies to the rural folks."

According to Mr. Dam, the trick in life insurance marketing is retaining the agents and increasing their productivity. World over life insurers experience 70 per cent erosion in agency force at the end of fifth year and in India nearly 50 per cent of the new agents
quit the profession at the end of first year itself.

"Reducing the agents attrition rate and improving their productivity directly impacts the company’s bottom line," he explains. Already couple of OM Kotak agents have hit the jackpot with sizeable business and the company is leveraging this to attract fresh talent
and boost the morale of the existing ones.

OM Kotak plans to increase the number of agents from the present 500 to a field force of 2,000 by fifth year.

Though employing just one distribution mode at present – individual agents- OM Kotak plans to use other modes in future like corporate agents, brokers in addition to floating an independent distribution company.

"Distribution itself has an immense business opportunity," Mr. Dam remarks. To be headed by Mr.Sandip Shrikhande of Kotak Securities, the proposed outfit will initially be a 100 per cent subsidiary of Kotak Mahindra Finance and in course of time will be
transformed into a joint venture with Old Mutual as the other partner.

The other interesting possible strategy would be to buy out the existing policies issued by LIC/new players and issue a fresh policy- a technique adopted by housing/car loan companies. As a result of stiff competition and to achieve targets housing/car loan
companies are lending at the prevailing interest rates to borrowers to close their existing housing/car loan accounts.

"US based life insurers do adopt such tactics. In India it will surely happen but will take some time," says Mr. Ahluwalia.

For the present the company hopes to garner more clients by offering new products like group insurance and unit linked life insurance. A team from Old Mutual is currently camping at Mumbai to design the unit linked insurance product.

In addition OM Kotak is marking its presence in major cities by opening branch offices. The company will be present in 13 cities in the first year and 21 cities at the end of second year.