Bancassurance Model Pays Off For Sbi Life
Hindu Business Line 7th August 2006
To hike its capital base by Rs 100 crore in H2
As the MD and CEO of SBI Life - the first private life insurance company to break even since privatisation - Mr S. Krishnamurthy has proved his detractors wrong about the viability of the bancassurance model. Bancassurance has been cost-effective and helped the company make profits for the first time.
The way ahead for SBI Life, according to Mr Krishnamurthy, is to strengthen the penetration of bancassurance through a proposed Rs 40-crore IT project across bank branches. The CEO projects a growth of 150 per cent in new business premium and the company will hike its capital base by Rs 100 crore in the second half of the year. Excerpts from an interview:
What are the challenges ahead for SBI Life?
We aim to strengthen the bancassurance model through the branches of State Bank of India and other associate banks we have tie-ups with. Currently, SBI Life products are being sold in over 6,500 branches of the State Bank Group - around 1,500 branches are selling individual policies and another 5,000 group products.
Bancassurance is the company's key distribution channel, contributing over 43 per cent to the total premium o, at Rs 470 crore for the financial year ended March 31, 2006. This year we hope to increase that to 50 per cent.
What is the strategy to increase the contribution of bancassurance to 50 per cent?
We have to increase the penetration in each of the branches. For instance, if a branch has 5,000 customers, currently we would have tapped about 80-100 customers. The idea is to increase this to 1,000 to 1,500 customers.
Towards this end, we are working on an intranet model along with SBI to provide on-line sales support to the bank staff. At the touch of a button, `bancassurance - online', will offer bank staff access to product knowledge, FAQs, premium calculators and sales illustrations. So, he or she would immediately be able to answer the customer queries. This will also help them mine customer data and identify which product would be appropriate for the client. The estimated investment in this first-of-its-kind project is around Rs 40 crore. The pilot will be launched shortly.
What are your expansion plans for the other distribution channels?
We are planning to grow our retail agency from 8,000 to 25,000. This agency force will be devoted to high networth individuals and will sell policies of a bigger ticket size. Bigger policies would mean that the annual premium size for traditional policies would be around Rs 10,000 and in the case of unit-linked plans, it would be around Rs 25,000 to Rs 30,000. SBI Life branch network will be expanded from 60 to 150 this year.
Which are the new products you will introduce this year?
We will be introducing around three or four pension products in the unit-linked version. We will also plan unit-linked group products for corporates in the pension and superannuation segment.
ULIPs constituted 25 per cent of the product portfolio last fiscal. This year we expect to increase that to 50 per cent. We are currently seeing a good demand for ULIPs with equity funds as the main component. SBI Life has been educating its customers to stay invested in the equity market for the long term and not get panicky about temporary aberrations.
What is your business target for the year? Will you infuse more capital this fiscal?
We expect our new business premium to grow by 150 per cent and touch around Rs 2,500 crore by the end of the fiscal. Our profit should grow to a double-digit figure from last year's Rs 2 crore.
The company's capital base of Rs 425 crore will be hiked by another Rs 100 crore in the second half of the year to meet growth requirements.