ET BureauTarun Chugh, the recently-appointed MD and CEO of PNB Metlife, says foreign direct investment is necessary for life insurance companies to penetrate into tier III and IV cities. In an interview with ET’s Shilpy Sinha, he says Rs 25,000 crore to Rs 30,000 crore will flow into the sector if the limits are raised. Edited excerpts.
How is a public sector bank-promoted insurance company different from a private bank-led insurance company?
There are significant positives: the relationship that a public sector bank typically has with its customers is far thicker. A customer can actually sit and have tea with the banker. The public sector banker is busier as he handles loans, liabilities and assets. So, every branch manager is empowered. They may be less savvy with the internet. In a public sector bank, you cannot suddenly change your product mix.
Is persistency better in public sector banks?
It is about what product you are selling and the kind of systems you have. If you have an ECS or direct debit, premium payment becomes easier. It is not like you are interacting with a customer on a regular basis. Interaction happens on a quarterly, half yearly, or annual basis. Here, a public sector bank gets involved with almost everything, including reminding a customer. Interaction in life insurance is the key.
How has PNB been as a partner?
PNB has been very demanding with the kind of products they want to sell. Everybody has been through cobrapost and tough times. We are very clear that we will sell products that are bundled. Here, we have launched the first-of-its-kind family bachat khata. This is the first time that we are bundling on-return, on-premium term plan on the liability side. Normally, bundling is on mortgage, education loans, but this is the first time on savings account. If something happens to the account holder, his grocery bills and rentals will be paid from the same account. The best part is if nothing happens, than he gets the premium back with certain interest. This is a term plan with return on premium.
Your business income has not grown much this year despite having the country’s second-largest public sector bank as your bank partner? Is it in line with your expectations?
We grew in July if you look at the y-o-y numbers. Last year, September was a big month for the entire industry. This year, we will see year-on-year growth. We were looking at our capabilities, gaps in the first three months. Now, the discovery bit is over and we are working on the strategy. I expect growth of 7-10 per cent over the industry. I expect industry to grow by 5 per cent, so we should grow by 15 per cent. PNB contributes 40 per cent to our top line. Around 60 per cent comes from bancassurance, 35 per cent from agency, and 5 per cent from digital.
Are you planning to change the mix?
We will be doing a lot of digital. Digital and other channels – corporate agencies – should account for 10-15 per cent of business in the next three years.
Where do you see PNB Metlife in the next five years?
I would like to see PNB Metlife in the top quartile. We were 13th, now we are 8th. So, I don’t see any reason why we cannot be in the top quartile. We are looking at this in terms of profit, and not topline. We are going to focus on agency, bancassurance and leverage the PNB brand. The big thing is customer-centricity. We will focus on expense control. The other thing I am focusing on is disruptions. Are we looking at the way social infrastructure is changing? Are we recognising the fact that there is a single parent, there is a working mother and there are people who do not want to get married till 35-40?
How will you drive PNB Metlife to the top quartile?
We have to identify customer-centricity platforms. We have to drive the PNB brand, make the agency profitable, identify customer requirement, be efficient such that the product looks better and have larger share of the customers’ wallet. We do not have a pension product, health product and online products, but we have got significant number of branches. We cannot restrict ourselves to tier I and tier II cities only, we need to reach to tier III and tier IV cities as well. The government is talking about increasing FDI in the sector. There are a lot of things to do with digitisation.
Many companies have started writing life insurance policies without proper medical check. Does this expose you to the risk of fraud?
No company has suffered due to underwriting. We have a control system. We have tied up with Cibil and have financial underwriters. Underwriting is about age, income and address. The industry has come together. We have blacklisted some places. South and west are good while north is a bit tricky. There are a few areas which are not so good, which are blackout areas -- we don’t go there. I am looking at bancassurance through J&K Bank, Karnataka Bank and PNB. We are following anti-selection. Customers come to a bank to buy life insurance only when they are the customers of the bank.
How important is FDI for your company?
The government did make a statement that FDI will be allowed up to 74 per cent. Accordingly, foreign companies have been showing interest in the sector.
How is a public sector bank-promoted insurance company different from a private bank-led insurance company?
There are significant positives: the relationship that a public sector bank typically has with its customers is far thicker. A customer can actually sit and have tea with the banker. The public sector banker is busier as he handles loans, liabilities and assets. So, every branch manager is empowered. They may be less savvy with the internet. In a public sector bank, you cannot suddenly change your product mix.
Is persistency better in public sector banks?
It is about what product you are selling and the kind of systems you have. If you have an ECS or direct debit, premium payment becomes easier. It is not like you are interacting with a customer on a regular basis. Interaction happens on a quarterly, half yearly, or annual basis. Here, a public sector bank gets involved with almost everything, including reminding a customer. Interaction in life insurance is the key.
How has PNB been as a partner?
PNB has been very demanding with the kind of products they want to sell. Everybody has been through cobrapost and tough times. We are very clear that we will sell products that are bundled. Here, we have launched the first-of-its-kind family bachat khata. This is the first time that we are bundling on-return, on-premium term plan on the liability side. Normally, bundling is on mortgage, education loans, but this is the first time on savings account. If something happens to the account holder, his grocery bills and rentals will be paid from the same account. The best part is if nothing happens, than he gets the premium back with certain interest. This is a term plan with return on premium.
Your business income has not grown much this year despite having the country’s second-largest public sector bank as your bank partner? Is it in line with your expectations?
We grew in July if you look at the y-o-y numbers. Last year, September was a big month for the entire industry. This year, we will see year-on-year growth. We were looking at our capabilities, gaps in the first three months. Now, the discovery bit is over and we are working on the strategy. I expect growth of 7-10 per cent over the industry. I expect industry to grow by 5 per cent, so we should grow by 15 per cent. PNB contributes 40 per cent to our top line. Around 60 per cent comes from bancassurance, 35 per cent from agency, and 5 per cent from digital.
Are you planning to change the mix?
We will be doing a lot of digital. Digital and other channels – corporate agencies – should account for 10-15 per cent of business in the next three years.
Where do you see PNB Metlife in the next five years?
I would like to see PNB Metlife in the top quartile. We were 13th, now we are 8th. So, I don’t see any reason why we cannot be in the top quartile. We are looking at this in terms of profit, and not topline. We are going to focus on agency, bancassurance and leverage the PNB brand. The big thing is customer-centricity. We will focus on expense control. The other thing I am focusing on is disruptions. Are we looking at the way social infrastructure is changing? Are we recognising the fact that there is a single parent, there is a working mother and there are people who do not want to get married till 35-40?
How will you drive PNB Metlife to the top quartile?
We have to identify customer-centricity platforms. We have to drive the PNB brand, make the agency profitable, identify customer requirement, be efficient such that the product looks better and have larger share of the customers’ wallet. We do not have a pension product, health product and online products, but we have got significant number of branches. We cannot restrict ourselves to tier I and tier II cities only, we need to reach to tier III and tier IV cities as well. The government is talking about increasing FDI in the sector. There are a lot of things to do with digitisation.
Many companies have started writing life insurance policies without proper medical check. Does this expose you to the risk of fraud?
No company has suffered due to underwriting. We have a control system. We have tied up with Cibil and have financial underwriters. Underwriting is about age, income and address. The industry has come together. We have blacklisted some places. South and west are good while north is a bit tricky. There are a few areas which are not so good, which are blackout areas -- we don’t go there. I am looking at bancassurance through J&K Bank, Karnataka Bank and PNB. We are following anti-selection. Customers come to a bank to buy life insurance only when they are the customers of the bank.
How important is FDI for your company?
The government did make a statement that FDI will be allowed up to 74 per cent. Accordingly, foreign companies have been showing interest in the sector.
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