SBI Life Insurance : Creating insurance awareness among the community

An interview with Arijit Basu | Managing Director & CEO | SBI Life Insurance Company Limited

With what objective was “SBI Life” set up?

Reply: SBI Life was set up in March 2001 with a vision to be the most trusted and preferred life insurance provider. We were formed with the objective of catering to the insurance needs of every insurable person in the society and extending to him or his beneficiaries, adequate financial support post retirement /death /disability at a reasonable price. We aspire to be the insurer to every Indian while educating them about the importance of insurance to secure the future of themselves and their loved ones.

What is the exact role of “SBI Life” in insurance sector”?

Reply: SBI Life is actively engaged in life insurance, over the last 15 years, to promote life insurance and increase the insurance penetration in the country. Using the extensive reach of our exclusive Bancassurance partner – State Bank of India and our productive Agency workforce, we have been able to insure more than 1.1 Crores individual lives and meet the insurance needs of our diverse community. Our role is to maximize mobilization of people’s savings and make our insurance offerings more attractive and suitable to our customer’s needs.

How do you view SBI Life’s significant progress since its inception?

Reply: SBI Life started its operations in FY 2002 with 125 Crores of capital and less than 50 employees. By FY 2006, we crossed Rs 1,000 Crores in Total Business premium (GWP), Rs 2,000 Crores in Assets under management and became the first private company to turn profitable within 5 years of its operations. Our growth story has been more then incredible in the past 10 years supported by all the stakeholders in our company. We are the largest private life insurance company on the basis of total new business premium income consecutively for past seven years in India. Our Assets under management grew by c.44% on a year on year basis from FY 2006 to FY 2016 and is now at Rs. 99,443 crores as of Feb 2017. Based on the recent stake sale to KKR and TEMASEK, SBI Life became the most valuable life insurance company in the private life insurance space.

How is the overall scenario of Indian insurance sector?

Reply: India’s life insurance market is currently ranked 42nd largest in the world and 9th largest in Asia in terms of premium income. At the time of opening of the life insurance industry in FY 2001, there were 4 private players in addition to LIC. The opening up of the Industry and impressive growth rate saw a rapid increase in the number of players in the life insurance space to 24 in FY 2016. Premiums have grown from Rs 501 bn to Rs 3,668 bn (CAGR of 15.3%) between FY 2002 to FY 2016. Assets under management have grown from Rs 2,304 bn in FY2002 to Rs 24,490 bn in FY2016 (CAGR of 18.4.%) Despite the sharp increase in number of insurers, the country remains grossly underinsured in terms of penetration and density. Life Insurance penetration (measured as a % of insurance premium to GDP) rose from 2.2% in 2002 to 4.6% in 2010, but has declined to 2.7% in FY 2016, indicating overall growth in insurance premium has been lower than the growth in GDP in recent years. India’s insurance penetration is far below the global average of 3.5%. However, the growth momentum in the insurance industry has picked up significantly in last two years providing attractive opportunities for existing and new insurers. A combination of healthy GDP growth, favorable demographics, increasing preference for financial savings and underpenetrated protection insurance is expected to support growth in India’s insurance sector.

What potential insurance (mainly life insurance) sector has in India?

Reply: Life insurance sector in India is still evolving and remains an under-penetrated market.  The market is mainly driven by push sales and tax incentives. There is a lack of customer pull which is expected to increase in coming years on account of growing awareness, increase in disposable income leading to higher purchasing power and increase in middle class and working population in the country. Recent interventions by the government promoting various social security schemes have also augmented well for the creation of financial savings and security awareness.  The years ahead of us seem extremely encouraging with India being an attractive destination for insurance investment, given its highly favorable demographic profile and rise in inclination towards financial savings coupled with the currently low level of insurance penetration. India’s population, aged 20 to 35 years, is expected to grow from 275 million in 2005 to 354 million in 2030 (EIU estimates), creating a strong support system to propel growth. As insurance awareness increases, the number of policies, currently at 360 million, is expected to grow over the next 5 years at a Compounded Annual Growth Rate (CAGR) of 12%-15%.

What are the challenges Indian life insurance sectors facing today?

Reply: The Indian life insurance industry has witnessed a lot of regulatory interventions since 2010, being proactive steps aimed at simplifying products, clarifying the role of various intermediaries and creating a favorable ecosystem for all the stakeholders. A plethora of changes within a span of 4/5 years also created some challenges for both insurers and intermediaries. However, we believe that these changes have helped the industry to mature, in many ways – bringing in higher transparency, reshaping distribution tactics etc. One of the key challenges facing many private players today is the creation of an efficient distribution model that facilitates reaching out to people especially living in rural and economically backward places. Bank led insurers have enjoyed a distinct advantage as they are able to leverage the parent Bank’s vast distribution network cost-effectively to grow the top line. The most acute challenge faced by almost every life insurance player is the lack of insurance awareness among the community. All the key stakeholders ranging from Govt. of India, IRDAI, Life Insurance Council and 24 life insurance players are actively doing their bit in order to increase awareness levels about insurance as a long term protection and savings need.

What would you say are the important steps taken by “SBI Life” to face the challenges?

Reply: SBI Life strategy of having a balanced product and distribution mix has augmented well in reducing its dependence on any specific product or distribution medium. It has helped us in tackling the regulatory changes related to product and distribution in an efficient manner. SBI Life has also taken several initiatives in recent times to promote healthy sales practices and focus on regulatory compliance at all levels. This is reflected in the fact that SBI Life has the lowest mis-selling ratio among the major private players in India today.

As mentioned before, one of main challenges faced by the Indian insurance industry is a lack of awareness among people regarding the importance of insurance. To improve financial literacy, we have been carrying out various campaigns (advertising, mailers, emails etc) through which we highlight the importance of various life insurance offerings.

What are the recent activities of “SBI Life”?

Reply: SBI Life is promoting the use of digital tools among its sales force for selling insurance to customers and for monitoring performance. Selling insurance digitally is helping us to reduce the amount of paper work involved in whole sales process thereby leading to faster policy issuance. Also using a digital tool for tracking activity is helping the sales force in managing their time efficiently.

To promote the culture of ongoing learning in the company, the company is promoting the use of a smart phone based learning application which enables the employees to access the learning material anywhere anytime.

SBI Life has undertaken various customer engagement initiatives where we intend to educate our customers about the insurance industry as well as the company through regular updates via SMSs, emails etc. Through this initiative we aspire to strengthen our relationship with our customers resulting in an increase in the customer retention parameters while improving the overall experience for the customer.

In December 2016, SBI Life sold 3.9% stake to private equity investors KKR and Temasek for Rs 1800 Crores, valuing the company at Rs 46,000 Crores. This is a clear indication of the kind of value that the company has created over the years for its stakeholders. We believe that this value would definitely see an up-trend in the near future as we continue to grow profitably.

How do you see “SBI Life” in the year 2020?

Reply: We aspire to continue leading the private life insurance industry offering excellent customer services, while achieving high standards of operational efficiency. To further accelerate our growth while ensuring best in class customer service, we have made investments towards digitization and innovation in our processes and products. We are also focused on strengthening our brand in the minds of the customer and have conducted studies and surveys to comprehend the purchasing behavior of the customer in a better manner. We are the first Indian private life insurer to plan operations abroad and we seek to make a strong presence internationally in the years ahead.

On the distribution network front, we plan to further diversify our distribution mix by focusing on growing our other distribution channels, in addition to our main engines of growth – Banca and Agency channels. We plan to enhance our reach by tying up with a number of payment banks and NBFCs. We are currently in talks with several of these enterprises and expect to be serving our customers through these modes in the near future. Initiatives have also been taken to source policies through tele-calling and online portals. We are attempting to increase our digital presence by launching several products through online modes and strengthen our digital presence through our online channel.

What are the major thrust areas in the coming days? Elaborate SBI Life’s future plans.

Reply: The major thrust areas for SBI Life currently are:

– To maintain its leadership position in the private market space

– To leverage technology to transform every process across the entire value chain – from customer acquisition to claim settlement

– Actively engage in customer & distributor engagement and interaction to improve the overall customer & distributor experience

– Strong digital presence through Website & Social media leading to greater brand recall in the minds of the customer

– Skill enhancement through ongoing learning of all employees and distributors

– Risk mitigation by ensuring strong and compliant processes and a vigilant and educated sales force

SBI Life Future Plans:

We aim to become most preferred life insurance partner for every Indian. We believe that we have and will continue to put in place the required strategies and resources to become the top private players on all financial and non financial parameters ranging from top line, assets under management, profitability, value, persistency, claim settlement and overall customer service thus creating value for all our stakeholders

Any comments on government policy?

Reply: The Insurance Laws (Amendment) Bill, 2015 was passed by parliament in Mar 2015, paving way for foreign partners to increase their stake up to 49% in Indian insurance companies. Till date, around 9 companies have increased their foreign shareholding from the initial share of 26%, leading to FDI inflow of more than Rs 10,000 Crores. Insurance being a capital intensive sector, availability of foreign capital would help in increasing the distribution reach, formulation of innovative products catering to diverse customer needs, improving customer satisfaction through the use of latest technology.

Recently through its two affordable insurance schemes – Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY), the government has been able to bring under insurance cover a large section of the society which earlier did not had any kind of risk coverage. Also through these schemes, the awareness level regarding the importance of insurance cover has increased manifolds among the masses. SBI Life has played an important role in making the PMJJBY scheme a success by covering around  67 Lacs customers under the scheme out of the total 3 Crores customers covered by the whole life insurance industry.

(Shilpa Bichitra | Anniversary Edition | 2017)