IDBI Federal Life looks to grow other proprietary channels as IDBI Bank set to exit jt venture

Faced with the imminent exit of one of its promoters and muted growth, private sector IDBI Federal Life Insurance is developing other proprietary channels to increase sales.

“Growth has been a little muted as business from IDBI bank has de-grown by 60 per cent to 70 per cent due to LIC coming on board. IDBI Bank used to be a 50 per cent contributor to our business, so naturally this is a hit that has happened. It is a short-to-medium term impact,” said Vighnesh Shahane, Managing Director and CEO, IDBI Federal Life Insurance.

Noting that IDBI Bank branches are now primarily selling LIC products, Shahane said the private sector life insurer is incubating proprietary channels to compensate the loss from IDBI Bank.

“We are growing agency profitably, we are incubating direct sales channel, and we are getting aggressive in broking and online space. These are proprietary channels we are focussing on to compensate short-to-medium term loss,” he told BusinessLine. According to IRDAI data, first year premium for IDBI Federal Life Insurance saw negative growth of 12.07 per cent between April and September this year.

Life Insurance Corporation of India had, last year, gained majority stake in loss-making IDBI Bank. Since then, the bank is using its network of branches to sell LIC policies. IDBI Bank, which owns 48 per cent stake in IDBI Federal Life Insurance, has also initiated plans to exit the joint venture to raise more capital for itself.

Shahane said sales through Federal Bank are growing by 35 per cent to 40 per cent this year. With the imminent exit of IDBI Bank, the insurer’s business development team is also talking with other banks for a bancassurance tie up as open architecture is now allowed. It is also looking to focus on online sales, which currently contributes about four per cent of the company’s regular premium. While declining to give a timeline for the exit of IDBI Bank, he pointed out that the process has been going on for about two years now.

“We are taking steps to compensate their loss in the medium-to-long term. I don’t see it as a permanent issue,” he stressed, adding that the focus over the next six to 12 months will not be so much on growth but “to go back to drawing board and set up a strong foundation for the company to propel ahead”.

IDBI Federal Life Insurance had posted a 31 per cent increase in its net profit to Rs 133 crore in 2018-19. Apart from IDBI Bank, Federal Bank and Ageas Insurance International hold 26 per cent stake each in the insurer.

Source: Business Line