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Long-term growth targets continue to remain attractive in ULIPs The current ongoing discussion of ULIPs may have some short-term impact on the sales growth of private insurer Birla Sun Life Insurance, but the long-term growth targets continue to remain attractive, Mr Mayank Bathwal, Chief Financial Officer, Birla Sun Life Insurance (BSLI), told Business Line in an e-mail interview. Excerpts: How was the last fiscal in terms of new business? We had a sales growth of 5 per cent in 2009-10 in line with our objective of balanced growth. We registered strong growth in the retail segment by issuing more than one million policies for the first time. Our market share has grown from 5.3 per cent in FY07 to 8.4 per cent in FY10. The insurance regulator's guidelines called for redesigning and launching new products, and consequently, we took a call to revamp our entire product portfolio. This led to some expected transition impact on sales growth in Q4. How do you expect growth figures to be this year? And the impact of the ongoing ULIP issue? BSLI's sales CAGR over the last three years has been at 46 per cent. We are very optimistic on the growth potential for the insurance sector in the years ahead. The current ongoing discussion of ULIPs may have some short-term impact on sales growth, but the long-term growth targets continue to remain attractive. These long-term targets are largely driven by factors such as compelling demographics, which include a growing middle-class population as well as a younger population with declining dependency ratio. New product segments that have clearly come to the fore of customer's consideration are health and pension. How much does each of your distribution channels contribute to your overall business? The company has approximately 1.7 lakh advisors, contributing close to 65 per cent of the total sales. We have a well-spread branch network comprising of over 600 branches in India. The company also partners with corporate agents/brokers (CAB), and BSLI has five bancassurance partnerships. Non-agency distribution contribution came to 35 per cent of the total new business premium with equal share from banks and CAB channels. Expansion plans in terms of branches and agents? The expansion of branches and agents will follow the assessment of potential at existing and new locations. Companies are facing a challenge in expanding the agency network and have innovated by opting for referral models. What has been your experience? We continue to believe that agency network in the medium to long-term time range is a cost-effective and more sustainable distribution model. Given its advantage in terms of scalability and control on the sales force as against dependence on third-party distributors, a large agency force is very critical for a company with national scale ambitions. As is expected with the management of a large sales force, there are usual challenges around retention, activisation and productivity management. Our experience has been relatively good so far and we are continuously working on improving productivity through segmentation, creating and rewarding vintage, and creating a large pool of entrepreneurs in the channel. The company will continue to look at new growth opportunities and newer channels to reach consumers. How did the recession change things for you? Did it affect your growth plans? Post downtrend, do you see any significant change in the investment pattern of investors? Given the low penetration levels of life insurance, high GDP growth rate and rising household savings, the future looks good for the sector. We remain bullish on the opportunity that lies ahead and will continue to introduce innovative customer-focused products, focus our energies towards driving higher productivity, strengthening our multi-channel distribution framework and leveraging our brand. In our opinion, the slowdown was temporary. It does not weaken customer sentiment towards the need for long-term investments to meet their financial goals. While the recession was no good news, it did offer some key learnings for the entire financial industry to review their business models as well as cost structures and thus improve efficiencies. The company focused on launching innovative products; for instance, BSLI was quick to understand the customer need for capital protection and pioneered in offering guarantees, including the highest NAV products. Any change in strategy? We expect increased product offerings under the traditional product basket to better balance the product mix and provide solutions that are in sync with current customer needs. How are each of your business segments doing? What has been the contribution from different segments? We have a fairly broad-based product mix across segments based on the customer life-cycle. And we have managed to create diverse market opportunities and cater to the needs of these segments by creating and providing multiple customer offerings. Internally, we have segmented our products and services across HNI and retail customers; our offerings are designed to meet their needs such as protection, retirement, education, health and wealth. We will continue to come up with new products based on customers needs and optimise investment returns for the customers based on their risk profile. Are there plans for capital infusion this year? BSLI has a strong capital base of Rs 2,450 crore. The company had infused an additional Rs 450 crore in 2009-10 to fund sales growth. Ref :-http://www.blonnet.com/2010/05/24/stories/2010052450380800.htm
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