IndiaFirst keen on disrupting market with alliances: RM Vishakha

Warburg Pincus is likely to raise its stake in IndiaFirst Life Insurance, a joint venture between Bank of BarodaNSE 4.75 %, Andhra BankNSE 1.74 % and the buyout firm. Chief executive RM Vishakha told Shilpy Sinha in an interview that with the PE firm on board, the company is looking to grow at 25% annually for the next five years. Edited excerpts:

How does the prospect of Warburg being the largest shareholder change the game for Indiafirst?

This year has started well where we have reported a 29% growth in individual annual premium equivalent on a Y-o-Y basis in the first half of FY20, compared with 11% industry growth. Our ambition is to grow at over 25% a year for the next five years and to be among the top 10 private life insurers in the country. Our shareholders are all aligned on our growth strategies.

Insurers are turning more to technology firms like Ola, Uber than to brick and mortar distributors. How do you look at it?

We believe in strategic alliances as a key focus area. Most of the current tie-ups being offered by insurers are group term products. We are keen on disrupting the market with alliances in a differentiated manner. As an example, if we were to tie-up with a cab aggregator, our proposal would be to provide options where the user could keep increasing his or her insurance cover while also investing in a suitable long-term plan by parking his surplus earnings on any given day.

What are the growth expectations from partnerships, against agency and other channels?

We are a bancassurance-led, multichannel distribution company. The growth expectations for any channel is substantially dependent on the base. Our foray into agency and other channels is relatively new. Therefore, our growth expectations from agency and other channels is not comparable to the expectations in bancassurance.

Warburg Pincus has come in recently after the FDI norms were raised to 49%. Are there any discussions around them raising stake from 26% currently?

It is a shareholder decision and not something that I can comment on. Having said that, any prudent shareholder will always seek opportunities to increase their shareholding depending on multiple factors prevalent at that given time.

What is the impact of public sector bank mergers on IndiaFirst life insurance, with Andhra Bank -- a shareholder --being merged with a bigger bank?

In one word, positive. Within a short span of time we have gained extended distribution, we have integrated systems and have activated new bank branches.

By when will you need to raise more capital? Will it be through an IPO?

We have always been a very capital-efficient company. We have done far more and good business with less capital. The industry average for capital efficiency ratio has been 1.97. we always had a capital efficiency ratio of 2.71, which is among the best in the industry. Our capital requirement has primarily been for maintaining reserves, solvency commitments. There are multiple avenues for raising capital provided by the regulator. We have raised money through a listed NCD in 2017. We still have additional capacity through which we can raise further NCD capital. An IPO has multiple parameters to be considered. Raising capital is just one of the reasons why any company will be going for an IPO. It is and will always be a shareholder decision.

Insurers are reducing exposure to ULIPs and focusing on term products.

It is a very positive development that in the past 20 years of privatisation of insurance we see an awareness about term plans. Thanks to the introduction of competitively-priced, standalone term products. Government initiatives like Pradhan Mantri Jeevan Jyoti Bima Yojana, the evolution of web-aggregators there has been greater awareness and a certain amount of pull that the insurance industry is seeing for term products.

How does lower insurance cover under the new product guidelines change the industry?

This is an option given to customers to decide on the insurance cover they require when looking at a shorter-term policy; and align their insurance requirement to the period of cover. As per original regulations, even if you took a policy for a minimum of 5-7 years, you needed to have 10 times the sum assured.

Source: The Economic Times