SBI LIFE INSURANCE IS AIMING TO BE AN LIC ALTERNATIVE

Uday Sankar Roy took over as managing director & CEO at SBI Life Insurance Co. Ltd just two and half months back. After 34 years as a banker with the SBI,. Roy enters the life insurance market at an interesting time when behemoth Life Insurance Corporation (LIC, is actually increasing market share, while several other players are vying for a piece of the pie. The veteran banker, who has marked LIC as his only competition, told C Chitti Pantulu about the challenges and strategy to achieve his goals at SBI Life Insurance. Excerpts:What is your immediate task at SBI Life? The first task is definitely to make our relationship with SBI more intense. We have got substantial business through the SBI linkage, but we have to use the network more effectively and aggressively on a full time basis. The funny thing about life insurance is that everyone is doing business and making losses. Customer acquisition costs are higher in insurance than in banking and that is why we will have to leverage the existing SBI network more effectively. Significantly however it would be worth noting that we were the first private sector company to breakeven in the very first year. How does the Insurance industry look? The market is huge but there are 16 players in life insurance and more will jump into the fray. Four to five more companies are slated to set shop in the next two-three months. The important thing is how many will actually survive. Two to three years down the line there will definitely be a shakeout in the industry. What will it take to survive in this competitive market? Three basic ingredients are needed for survival in the life insurance market, wherewithal to penetrate the market, customers’ trust and selling skills. Starting from scratch is costly and it affects viability as there is a price you pay for reach in this vastly spread out market. And then, while gaining customer confidence or recognition at the least in metros is relatively easy the real challenge is in the tier 2 and 3 centres. Finally, selling insurance is a different ball game that everybody can’t do. Fortunately for SBI none of these are a concern. All we need to bother about is the competition which for us is just the LIC. So how do you plan to beat LIC? We have decided not to copy the LIC model of business to do it. LIC has a history of life insurance and 1.2 million agents country-wide. We are young and have just about 25,000 agents. When LIC started in the business, things were different and the agency model was the only one available. Today, there are many more channels for marketing insurance products. For instance we will use SBI’s Bancassurance more intensively. Now it is extensive. There will be more emphasis on reaching non-customers and leveraging the 14,300 plus State Bank group branches across the country. So we are actually looking at deploying a hybrid distribution channel that is innovatively designed and deployed. Our strength is in the tier 2 and 3 centres and we are working on plans to have this hybrid network in place within a year. What kind of market size and business volume are you targeting over the next few years? Currently SBI Life has a three-four percent of the Indian life market. Unless we get to a 15% plus size, we cannot challenge LIC. Moreover, LIC has got aggressive with the advent of competition and has actually increased its market share to 75%. But I must add that this is a period of experimentation, consolidation and growth for SBI Life. We are likely to close the previous year with a business volume of over Rs 3,000 crore. It is possible to multiply this figure ten fold over the next three to four years. The market has the potential for this and everything depends on how we play our cards. What we have to work on is the huge population beyond the metros which is by and large still untapped. As I said we should be a around the 15% level in three to four years and in a position to be considered a strong alternative to LIC and second in size in the country. Also, there isn’t place enough for too many companies to be making money in a spread out market like this and there is bound to a shakeout soon. However, we are not really looking at the inorganic route to increase our size even though there will be some rich pickings in the market. We have the strength to grow on our own steam.

Source: Daily News & Analysis, April 11, 2007