Jan sales were disappointing, but we’re optimistic about Feb-Mar: IDBI Federal Life MD

January to March is a crucial period for insurance companies. GV Nageswara Rao is optimistic that innovative products and new approaches will improve business for IDBI Federal Life Insurance

Managing director and chief executive officer of IDBI Federal Life Insurance,. GV Nageswara Rao, says that while ULIPs are still popular, traditional policies are gaining the attention of customers. In an interview with Moneylife, he discussed how the company was adapting to the requirements of customers and the new regulations for the business.

How has business been this year and specifically what are your expectations during the crucial period, this month and next month? How much business is generated through bancassurance?

We had a healthy 37% increase in new business premium at Rs990 crore. We are projecting a growth of 70%-75% in terms of total premium income by the end of this fiscal. We have sold 2.5 lakh policies since inception with a sum assured of Rs13,647 crore. Two-thirds of business, in terms of premium, comes from bancassurance, while one-third is from agents. The number of policies sold via these channels is equal.

We have been focussing on improving efficiency and profitability. Unlike some other insurers, we have not downsized. We have doubled the number of agents. We have come out with innovative products to meet customer needs. We are trying out different approaches of direct marketing, like telemarketing and even salaried employees selling policies.

January sales were disappointing, but we are optimistic about the current and next month. March is the biggest month for insurance companies. The mix of ULIP to traditional policies is 60:40 now, earlier it was 80:20. The ticket size of traditional policies is smaller when compared to current ULIPs and that also leads to lower premium collection.

How many offices, agents do you have? How many branches for bancassurance?

We have 57 offices and 9,545 advisors. Bancassurance operates through 1,500 branches of our partners.  

How do you see the prospects of the just-launched traditional pension plan Retiresurance? Also, you are waiting for approval from the IRDA for a single premium pension ULIP. Why not regular premium pension ULIP?

We have designed Retiresurance to suit the definitive needs of people post-retirement. With an increase in the life expectancy, many Indians could be spending a good 20 to 25 years of their life in retirement. The product offers a guaranteed corpus for every premium paid. Moreover, if the customer continues the policy till maturity, the plan offers guaranteed loyalty additions. We will come out with a single premium pension ULIP soon. But regular premium pension ULIP is not practical for 4.5% per annum guaranteed. It is difficult to forecast future interest rate when premium is received each year over a long term.

New guidelines from IRDA, effective July 2011, require terminating the contracts of agents who fail to get more than half the policies sold by them renewed in the subsequent year. How will this impact business? What is your renewal ratio for policies?

It will be a challenge for us, but good for customers. The agent commissions in ULIPs have gone down, but renewals will add to commission. We are working on improving productivity through better training and sales aids. Our renewal ratio is 70-75%.

Is the single premium ULIP getting more sales compared to the regular premium ULIP? What would be the commission percentage for agents?

Yes, it is because of the reduction in the commission gap between single and regular premium ULIPs. It is also easier to sell the single premium ULIP. Agents sell a mix of products (ULIP, traditional) and the average commission is 8% of premium.  

Any expectations on the IPO guidelines, in terms of the number of years required in the business to be eligible to go for an IPO?

We would be happy if the number of years in business before going for IPO is seven or less.

How do you see the impact of DTC if the tax-savings aspect of ULIP changed?

It would have a big impact on business. Tax benefit is an important selling aspect of ULIP.

What has been the response to your TV advertisement campaign?

It's been great. We have received over 45,000 SMSes evincing interest in the product.

Are there any customer service initiatives for online premium payments?

We already have a functional online gateway for policyholders to make online premium payments.

Is term insurance sold more in urban or rural markets?

It is sold more in the urban market than the rural market. People who want something back at the end of the policy term don't go for term insurance.

What is your claims settlement ratio? Any plans for capital infusion?

We are nearing only the third year of operations and hence have only a few claims till now. We will look at capital requirement in the next fiscal.


Sensex, Nifty may head another 4-5% higher: Thursday Closing Report

If the indices record a shallow correction after the five-day run, expect more sharp gains

The domestic market opened flat as profit booking set in early on news that ADAG chairman Anil Ambani had been called by the CBI for questioning in the 2G spectrum scam. The futures and options contract expiry next month and the Union budget at the end of the month also kept investors on the back-foot. The key indices touched the day's lows in early trade and brushed aside early hiccups, as a fall in weekly inflation numbers for early February sparked off an upmove.

The momentum continued in the post-noon session, with the indices touching intra-day highs in the last half an hour and closing with impressive gains. Today's close was the fifth consecutive positive ending for the key indices.

The Sensex and Nifty opened at 18,345 and 5,502, but soon slipped into the negative zone. Within an hour, both indices hit the day's lows at 18,234 and 5,463 respectively. However, the fall was arrested and buying resumed after a couple of hours. The indices surpassed a nine-day high (from 7 February 2011) at 18,533 and 5,553, respectively.

The benchmark indices ended well above the 20-day moving average. The Sensex closed 206 points higher at 18,507, while the Nifty closed 65 points up at 5,546. The 301 points loss on the Nifty in the five days starting 4 February 2011 has been covered in this five-day run (starting 11 February 2011) with a gain of 321 points. The market will pause now for breath, but if the decline is shallow we will see a sharp rally unfolding.

The market breadth on the key indices was in favour of the gainers. The Sensex closed the session with 19 advancing stocks and 11 declining stocks and the Nifty had 33 gainers and 17 losers. Among the broader indices, the BSE Mid-cap index gained 0.91% and the BSE Small-cap index rose 0.94%.

All sectors, except realty, ended in the green. BSE Capital Goods (up 1.93%), BSE Bankex (up 1.50%), BSE Auto (up 1%), BSE Fast Moving Consumer Goods (up 0.80%) and BSE TECk (up 0.74%) were the top gainers. On the other hand, BSE Realty was down 0.89%.

HDFC Bank (up 4.15%), HDFC (up 3.15%), Bharti Airtel (up 3.14%), Larsen & Toubro (up 2.69%) and Tata Steel (up 2.16%) were the top performers on the Sensex. The losers were led by Wipro (down 1.34%), ONGC (down 0.61%) and Jindal Steel (down 0.57%).

Food inflation fell to a two-month low of 11.05% for the week ended 5th February as onions prices moderated and pulses became cheaper, prompting finance minister Pranab Mukherjee to assert that the rate of price rise will fall to a single-digit in some time. Food inflation fell by 2.02 percentage points from 13.07% in the previous week.

The finance minister also cautioned that a weekly decline in food inflation could be "deceptive". He, however, expects wholesale price index-based inflation to come down to 7% by March-end.

Markets in Asia ended mostly higher on signs that the global economy recovery is in place. The optimism was supported by improved earnings and positive forecast from the US Federal Reserve. Export-related companies in the region like Canon, Sony and Honda had a good day on the back of a strengthening dollar.

The Shanghai Composite added 0.10%, the Hang Seng rose 0.63%, the Jakarta Composite gained 0.51%, the KLSE Composite advanced 0.15% and the Nikkei 225 was up 0.26%. On the other hand, the Straits Times declined 0.38%, the Seoul Composite lost 0.60% and the Taiwan Weighted ended 0.33% lower today.

Back home, institutional investors were net sellers in the equities segment on Wednesday. Foreign institutional investors offloaded stocks worth Rs230.06 crore, while domestic institutional investors sold equities worth Rs68.49 crore.

Pharma major Glenmark Pharmaceuticals (up 0.64%) today said it has filed an application for human trials in the Netherlands for its molecule 'GRC 17536', which aims to treat pain and respiratory disorders. The company has completed animal trials on its novel chemical entity (NCE)-GRC 17536 and has filed the Phase I application for first-in-man trials, the company stated in a filing to the Bombay Stock Exchange.

Pipavav Shipyard (up 3.67%) has signed a memorandum of understanding (MoU) with US-based Northrop Grumman Overseas Service Corporation. The MoU will allow the company to focus on huge opportunities in the Indian defence sector with the help of technology and expertise possessed by Northrop.

The Steel Authority of India (up 1.75%) has sent a delegation to Mongolia to conduct a feasibility study for setting up a 3 million tonne per annum plant there. The proposed plant would involve an investment of around Rs15,000 crore. However, the plant will be set up only if the Mongolian government insures land for the unit and linkages to raw materials to feed the facility, company officials stated.


UTI Mutual Fund appoints four-member interim management committee

Following the selection of UK Sinha as SEBI chief, the mutual fund also appointed an executive search firm to identify a suitable candidate to head the company.

UTI Mutual Fund said it appointed a four-member interim management committee to run its day-to-day affairs and also looking for suitable candidate to head its operations.

UTI MF's chief UK Sinha has been appointed as chairman of Securities & Exchange Board of India (SEBI). Mr Sinha would replace CB Bhave as SEBI chairman.

In a release, UTI MF said, "The shareholders and the Board of Directors of UTI AMC have appointed an Executive Search Firm to identify a suitable candidate to head the Company. The Firm will look at both internal and external candidates. The process is expected to be concluded at the earliest."

The interim management committee appointed to run UTI's day-to-day affairs include Jaideep Bhattacharya, chief marketing officer, I Rahman, chief finance officer, Anoop Bhaskar, head-equity and Amandeep Chopra, head of fixed income, the asset management company said in the statement.


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