In the first quarter, growth was impacted by the pandemic and although there was some improvement, do you see better growth trends ahead? How has the demand changed for the sector post the pandemic?
I will start with your second question first. Covid has definitely impacted the way we do business all around and one of the impacts has been on the insurance industry. Covid has brought the need for insurance protection for people across all sections into sharp focus. As a result, there has been more interest in insurance products. We should remember that in the first three months, there was very strict lockdown and movement was restricted and there was very little business happening.
So in the first three months of the financial year, especially the first one and a half two months of April and May, we had very little business. As a result, the numbers for this year vis-à-vis last year or any previous years would be slightly tempered down. But if you look at it from the point of view of how we have recovered from this pandemic and the huge loss of business that we had in the beginning, you will find that we are on a growth trajectory as an industry. The second quarter was quite good and was followed by the third quarter which was absolutely high growth in terms of premiums and the business done.
One can assume that if this is the trend, then we are going to probably finish the year very well vis-à-vis last year. Going forward in the next two years, it will depend partly on how much longer this pandemic plays out and when the vaccine starts taking effect. I still think some of the effects will remain and there will be a stronger demand for insurance products going forward.
Is there a target market share that you are eyeing? Any strategic plans to expand it further?
SBI Life is the market leader in terms of private insurance industry. In IRP and in new business premium terms, we are clearly the leaders and we are also leaders in terms of embedded value in terms of a lot of other parameters. We have got very high persistency and profitability and in all these parameters, we are quite ahead. But we do not go by any numbers in terms of market share or market percentage that we are looking for. We sustainably try to sell good products and keep doing it and that is a very good formula. We have been doing it for many years and have reached market leadership. Selling good products to customers and retaining them — that is persistency wise also, we have been growing.
India has got a huge insurance market with only 2.82% penetration till now. This is much lower than many of the developing countries and China. We would like to keep growing this market. We cover all areas in India and we try to make sure that we reach more and more people and sell them good products. That is our aim and I am sure that this will bring us good growth.
Now that the government has hiked the FDI limit in insurance to 74%, do you see more FDI flows coming into the insurance sector going ahead?
I can only say that this opens up avenues for people to bring in more investment into the insurance industry from abroad. We would not like to comment specifically on our own company at this point of time. But this move itself will probably help a lot of smaller companies which are struggling to raise capital.
What about the government plans for the LIC IPO over the next one year?
I do not think the ground rules of insurance are changing. The rules are the same and the market is also the same. I do not think we see a big shift in terms of the way growth of the market or any shift in the market as such.
The SBI Life management has guided that retail growth protection is going to drive further improvement in your protection mix in APE. What kind of product mix do you expect and how will the share of protection shape up over the next two years?
Protection has definitely been a major driver for insurance this year. We are also seeing growth. Compared with last year, we sold 40% more protection in the third quarter. That is definitely a shift and overall also, we are focussing on protection and we would like to see more protection because that is a need that people have apart from all the other products. So the other products continue to be in focus but because of the pandemic and some changed circumstances, protection will be in sharper focus.
VNB margins have improved to 22%. Could it expand further to 23% and can better premium growth be expected going forward?
I would not like to go into numbers at this point of time. This has been a very different kind of year and the next year will depend on how normal a year it is and what are the new things that are in play out there.
I would not like to give any guidance or anything but what I can definitely say is that as far as VNB margins are concerned, we have been steadily growing our VNB margins over the last four, five years. Almost every quarter we have had an increase in VNB margins over the previous quarter and we are happy with that. We feel that it is a vindication of the way we are doing business, the way we are keeping the customer at the centre, the way we are making buying insurance easier through our digital transformation with all the initiatives that we have taken. As a result, I am sure that going forward, we can look at better VNB margins also if you look at the past trend.
Reports are suggesting that RBI is restricting banks from raising stakes in insurance firms. Is there a fair case for RBI to resist this?
We do not have any information on that.
You already have the lowest cost ratios and digital has been at the forefront. Over the next two years, what would be your digital strategy and how would that be embedded into your overall growth strategy?
Digital is very important for us and we have a strategy around it. To begin with, we have done digital enablement for all our processes and today about 99% of our on-boarding happens digitally. Same way, renewal premiums of almost 88% are collected digitally and on top of that, the processes are end-to-end digital.
You could actually have a digital KYC and on-boarding done. The applicant’s form is filled digitally and then the policy could also be issued digitally even though a majority of our customers still demand a physical policy form. But apart from that, all servicing and all claims, maturity claims, death claims everything can be done digitally and documents can be uploaded.
It is a complete process and we keep refining on that and we keep making it better and better. There are a lot of enablements given by the regulators. So, dispensing with wet signatures in certain cases and then the eKYC and the video KYC, we have adopted most of the new practices and we would like to adopt some new ones going forward.
Some of the things that we are doing is also to build APIs with our channel partners. If you look at SBI, we have a product on their Yono platform where you can buy an insurance product in three clicks. And we have sold more than 7.7 lakh policies till December 2020. So a digital push is already under way and we would like to have more and more such products and channel partners to whom we will offer very cutting edge digital products.
