Open to inorganic growth but it has to fit strategically: Pankaj Razdan, Birla Sun Life Insurance

In a chat with ET Now, Pankaj Razdan, CEO & MD, Birla Sun Life Insurance, says he sees a big opportunity for many players to consolidate and complement each other's strength from product, distribution and customer valuation issues. Edited excerpts

ET Now: Do you think large-scale consolidation is possible in the insurance industry?
Pankaj Razdan: I think if you look at every industry that has to go through a consolidation phase, it is a function of the size, opportunity and ability of the place to go and attract that opportunity. Indian opportunity still seems very large, very big but I think one does not have to forget that it is a distribution challenge in the current market environment.

If we do not have significant bank-based distribution, it becomes very difficult and very costly to go and penetrate this opportunity. So you will see definitely that of the 29-30 players, not everybody will be able to build a significant distribution either through bank or through an alternate distribution. So you will see a lot of consolidation definitely happening over a period of time and it is nothing new for this industry. We have seen this practically every year.

Whenever growth falls or a market looks difficult to penetrate, you start seeing consolidation, so I certainly believe it. I do not know whether it is going to take 6 months, 12 months or 18 months but definitely looking at the current constraints of distribution and penetration by finding alternate ways of reaching customers, I certainly see a big opportunity for many players to consolidate and complement each other strength from the product, distribution and customer valuation issues and become a better proposition to the customers in the market.

ET Now: What about Birla Sun Life Insurance? What is the strategy from here onwards to grow the market share from about less than 2 per cent in May 2016 in terms of annual premium equivalence?
Pankaj Razdan: I think we went through our own phase of growth and own phase of consolidation by rebooting our strategy, looking at a very focussed way of engaging customers because this is a business where you do not sell a product or you do not engage a customer for 5-15 years. You are buying a product and services for a customer who is buying for a second and third generation. So you had to have a strategy which is very strong engagement, oriented a strategy which is trust oriented. So we redefine ourselves, we rebuild our strategy and I am very happy to share in the last five quarters and on quarter on quarter we are showing growth.
In fact, this quarter numbers, the results are yet to out that will be seeing that every quarter has been a better quarter than last year whatever the results we have declared in last four-five quarters.
Our strategy is very clear, start building a non-polarised distribution channel. We start building through alternate distribution whether it is agency-led which is doing extremely well. We are one of the top three-four player in agency. What is important is not only the size of the agency but the quality and productivity of agency.
So in the last one-and-a-half-two years, you might have seen that we have cut down our size of the office and number of sales people but every quarter on quarter, our sales have improved. This means that less number of people are selling more. So we have got this momentum. We have got this productivity with use of a our new business model which is completely focussed on delivering an outcome what a customer want. We call it a trust based model. We call it a trust-oriented model so that is the only vision what we measure in our company today.

If you ask any of my team member, any of my branches, what is your business model? They say that we are measured on how much trust we are creating with our customer and there are various matrix to measure those trust whether it is a misspelling of complaint or persistency of your business. So what is important is not only to improve your business quantitatively in terms of the top line growth which is a very critical factor for a long-term profitability. It is also the quality of growth. I think in both the segments of quantity and quality, we have seen a very significant shift in last five-six quarters.

ET Now: Plus I am guessing that online sales are helping as well. I mean I moved from a normal policy in Birla to an online as well so I am happy customer. But my question more importantly is -- do you envisage this growth that you are talking about staying put for the foreseeable future and is there a plan looking at the kind of growth that you have, because you have hiked stake in a JV as well, is there any plan of listing this insurance entity separately at some point of time in the near future?

Pankaj Razdan: From the growth perspective, I must say that we are very clear that we have found a right business model. As I said, for us as much as the quantity of growth was important, so was the quality of growth. So how is there no misselling, quality of engagement is better, surplus is very high. We believe our strategy is absolutely right. We are building a multi-channel distribution and, of course, bank is a very-very important part of really leading a growth. But till that time you get a bank in place because current regulations are not so defined where banks are obliged to go and take everybody else, they are allowed to do a multi-partner but they are not obliged to do that. We are in a phase with a flux where you see slowly with the banks opening up for multi-players. But even in the absence of a big large banking player, we are building a channel under digital side and agency is doing extremely well on the productivity side both quantity, quality and alternate channel. So I think our growth strategy is in place and we believe we continue to grow in the foreseeable future.

On the listing, I would leave it to the shareholder to do that because for me listing could be one of the reason for people to raise capital. For me fortunately, we have solvency margins, are extremely good, both shareholders have put enough capital on the table for us to go and sustain growth for the foreseeable future so whether we list or not list is a shareholder issue right now.

ET Now: Would you also be looking at any inorganic growth?

Pankaj Razdan: As a group, the Aditya Birla Group and also the Aditya Birla Financial Services Group, are always up to looking at any kind of inorganic opportunities. It has been a constant process. It is not that today some mergers or some of these deals have happened in a particular space or a sector a financial service, but it has been a constant endeavour for our side to keep looking at any new opportunity but it has to fit strategically. It has to add some value to us and we see for us in financial services somebody who could really lead us and bring out a very significant value on the distribution side or on some product management side. If any of those opportunities come, we are always open to look at it.