KOCHI:
With its primary shareholder IDBI Bank announcing the sale of 27% of its stake to the other JV partners, Ageas and Federal Bank in August, IDBI Federal Life Insurance now seeks to strengthen its distribution network by ramping up its proprietary channels like agency, online, group and direct sales.
Vighnesh Shahane, MD & CEO, IDBI Federal Life Insurance said, “With this announced stake sale, the uncertainty around the company has been put to rest and we can now focus on the way ahead. While IDBI Bank was earlier our dominant distributor, business from the bank has now fallen to single digits. To compensate for this loss of business, we are focusing on growing our proprietary channels. With 64 branches and over 12,000 agents, we are looking to grow our agency business in a calibrated, profitable manner. Online is another focus area, especially in light of the ongoing pandemic crisis.”
“However, India is primarily a bancassurance-led country and will continue to be for some years to come. We enjoy an extremely good relationship with our shareholder and distributor, Federal Bank, with over 70% of our business coming from this channel. Even in this pandemic year, business from Federal Bank has so far shown a growth of close to 40%.” “We are also looking to expand our banca network. With the regulator allowing for open architecture, we hope to increase our distribution footprint through tie-ups with 1-2 mid-sized banks.”
In terms of business, IDBI Federal sees almost 60-65% of its business through the banks coming from Tier 2 & 3 cities and the rural areas. South India is the biggest market for the company thanks to the strong distribution network of Federal Bank, especially in Kerala. This year, despite the Covid situation, individual new business from the South markets has witnessed a 26% growth over the same period in the last year (figures as per Aug 2020 YTD).
Vighnesh added, “While the metros and Tier 1 cities tend to be over-banked and over-insured, we see huge potential in the smaller cities and rural areas. Insurance awareness is increasing among these consumers and we expect further growth from these markets.”
The ongoing Covid-19 situation has had a slightly negative impact on customer acquisition and persistency, but the overall situation of the insurance industry has been much better than expected. Companies are seeing new business, claims, surrenders, retention at almost the same levels as the previous year. Most companies are at 80-90% of the business that they had achieved last year at this time, while a few companies are even showing growth.
Vighnesh commented, “Ever since demonetisation, the insurance industry has been on a growth trajectory year-on-year. While the current Covid situation has been a bit of a setback, there has been a plus side. Firstly, there has been an increase in the awareness of insurance among general consumers, especially for term and health insurance. Secondly, the entire insurance industry has accelerated its digital journey; launching new online term plans and reaching out to customers creatively.”
“So while my outlook in the short term would be guarded because of the ongoing Covid situation, in the medium-to-long term, my outlook would yet remain bullish because of these positives that have emerged for the insurance industry.”
In FY20, IDBI Federal Life Insurance reported a profit before tax of INR 162 crore, a growth of 22% over FY19. This was the 8 th consecutive year of profit for the organisation since it first declared profit in FY13. IDBI Federal also recorded a total premium of INR 1,843 in FY20 as against INR 1,933 in FY19, driven by a strong growth of 14% in renewal premium. By staying attuned to customer needs and looking to tailor experiences and solutions that meet those needs, the 13 th month persistency reached 82% with the company being in the top quartile of all persistency buckets.
