Mumbai: February and March are the two months when life insurance policy sales soar. It is the time of the year when the tax noose tightens and people would like to reduce their tax outgo. With the year 2003 going to be no different from the earlier ones, all private life insurers like ICICI Prudential Life Insurance are planning to eat a share of that pie.
''ICICI Prudential Life positions its life insurance products as complete financial solutions, and hence sees even sales than those products positioned as tax-saving tools, as the latter are purchased more at the time of filing taxes. Having said that, life insurance in India is still regarded as a tax-saving instrument, though the perception is changing. So we are also likely to see higher sales over the next three months,'' says ICICI Prudential Life managing director and chief executive officer Shikha Sharma.
Starting her career with ICICI, the erstwhile financial institution, in 1980, Sharma was involved in setting up I-Sec, a joint venture between ICICI and JP Morgan, and also ICICI's personal financial services that includes retail deposit taking, retail credit, credit cards and web trade.
The Rs 325-crore equity-based ICICI Prudential Life is a 74:26 joint venture between ICICI Banking Corporation and Prudential plc, UK, and started operations in December 2000. ''In mid-November 2002, the company crossed the 2-lakh policies landmark with a premium income of Rs 280 crore. The total sum assured is in excess of Rs 5,400 crore to become the No 1 private life insurer in India,'' she says.
With the business growing and to meet the reserving and capital adequacy norms, the company is planning to bring in additional equity of Rs 50 crore in a couple of months. Excerpts from an interview:
How many policies have you sold during this fiscal? Can you give the product-wise break-up and the premium earned?
We have sold over 1 lakh policies this fiscal, and over 2 lakh policies since we began operations in December 2002. Non-traditional products such as pensions, market-linked policies and SmartKid form over 60 per cent of the product portfolio.
What is your renewal premium income and new premium income? What is the trend you see now in respect of the size of policies, the mode of premium payment and policy surrenders?
Owing to its focus on selling life insurance on the platform of protection and as a versatile financial instrument, ICICI Prudential Life has attracted business of premiums and sums assured greatly exceeding those that we had seen two-three years ago. The average sum assured is now well over Rs 2 lakh. Also, because of the increased awareness of benefits of life insurance, people are more motivated to keep their policy in force, and hence the percentage of policies that are surrendered or lapsed has also decreased.
Can you elaborate on your rural strategy?
ICICI Prudential Life has met its rural obligations as per IRDA [Insurance Regulatory Development Authority] guidelines.
How different are your products when compared and contrasted with other players?
Our products have been structured to be as flexible, liquid and transparent as possible. Many products have been designed based on customer feedback so as to include elements that would appeal to customers. For instance, ICICI Pru SmartKid, has been structured with flexible maturity ages and in a manner that the child receives the money at specific educational milestones.
ICICI Prudential Life has a range of products that meet the needs of every segment, in both individual and group policies. There are 13 policies to cater to individuals, which can be enhanced with six riders so as to create a number of combinations. The company also offers three group policies - group term, group gratuity and group superannuation.
Pension is said to be a lucrative market. What is your plan on that front?
Given the demographic and social conditions of India - like an ageing population, absence of a social security system and inflation - ICICI Prudential Life sees immense potential in the growth of retirement products. We have already introduced three retirement products - ForeverLife, LifeTime Pension and LifeLink Pension.
What is your bonus strategy? Did you declare bonus last year? If not, when do you expect to declare bonus on your policies?
For our endowment products - CashBak, Save 'n' Protect and SmartKid - there are guaranteed additions for four years, after which bonuses are declared on a yearly basis. Market-linked products such as LifeTime, LifeLink, LifeTime Pension and LifeLink Pension are valued on a NAV [net asset value] basis. Hence policyholders benefit from the appreciation in the fund, of which there are three options - protector, balancer and maximiser.
There are two products with guaranteed returns - ReAssure and AssureInvest. We believe that there is a place for assured return products in our product portfolio. We follow a proactive strategy of reviewing these on a regular basis in order to provide sustainable, consistent returns in the long term.
Are you defining the surrender value of your policies upfront? If not, what are the reasons preventing you from doing the same?
The surrender values for some of our policies are declared upfront. The market-linked products are based on NAV, and hence have no surrender values.
What are your communication strategy and your budgeted promotional spend?
When we first began operations, the task was to present the visiting card of the company to the public at large and build credibility and stature and to give the consumer the confidence that ''here is a company that can be trusted to invest funds with.'' This required a corporate campaign - to establish the brand, build awareness and give the brand a larger-than-life image. The advertising idea, which was encapsulated in symbols of protection from the initial print campaign, culminated in the corporate film where sindhoor was used as an endearing and lasting symbol of protection.
Once the corporate image and brand identity were established, and as the company expanded and its product range grew, the next phase of communication was to give the consumer a rational and tangible reason to buy - first of all insurance and secondly from ICICI Prudential Life. This was tackled through product-specific advertising, such as for ICICI Pru SmartKid, retirement solutions or LifeTime.
How many branches do you have today and what is your plan to expand that network? As regards issuance of policies, is it centralised or does the concerned branch office issue them?
ICICI Prudential Life operates in 23 locations, some of which have multiple branches. Policies are issued from the head office in Mumbai.
How many agents do you have? Apart from individual agents what are the other distribution channels you are looking at?
ICICI Prudential Life currently has over 15,500 advisors across the country. The commissions are structured so that the advisor is adequately incentivised to sell the policy and keep it in force, but not so high because the customer will not get enough value from the policy.
We use a multi-channel distribution strategy - leveraging bancassurance, corporate agents and direct marketing - in addition to advisors and financial service consultants. All channels sell all the products. Some of our bancassurance partners are ICICI Bank, Citibank, Federal Bank, South Indian Bank, Allahabad Bank, Bank of India and Punjab & Maharashtra Cooperative Bank.
Have you transferred any money from the shareholders' account to the life fund?
Yes, funds have been transferred from the shareholders' account to the life fund in order to maintain the CAR [capital adequacy ratio].
Can you explain your investment strategy? How did the sliding down of interest rates and dull equity markets affect or alter your business plans? What are your investment income and the yield on investments?
Life insurance is a long-term financial investment and ICICI Prudential Life invests policyholder's funds in order to earn sustainable, consistent returns over the long term.
Policyholders investing in our market-linked products can select from three fund options - each with a varying degree of risk and return. The policies are structured to be as transparent as possible and policyholders can check the NAV of the policy on a biweekly basis in leading newspapers.
The reduction in interest rates has not affected ICICI Prudential Life drastically, as our products are priced sustainably and our assured return products are revised on a regular basis.