“The pandemic will change the landscape of the insurance industry. The cost base of insurance companies will go down. It will go down because will only incur the expenses which are critical and expenses which are ‘luxurious’ will reduce extensively,” the IndiaFirst Life Insurance Company Ltd (IndiaFirst Life) deputy CEO told in an interview.
IndiaFirst has managed over 90 per cent efficiency working out of home, he said adding that the company is realising that people can work from home even on permanent basis.
“It means you don’t need people to come to office daily…you can save on office space and you can save on rent as well as number of offices. People might continue with the work from home strategy,” Gandhi said.
So overall there will be fairly large savings on the expense side, he added.
“The second thing which will happen in my mind is that there will be very-very conscious shift in the insurance product-mix,” he said.
“The amount of business that will happen through the protection portfolio will increase by leaps and bounds, and on the savings side people will prefer opting for guaranteed return based products because the minute the guarantee return is not there then you are dependent on the whims and fancies of the market and today because of the uncertainty very-very few people are open to bet on the market,” Gandhi said.
Moreover, the interest rates on savings are also falling thus people will more so look for a guaranteed return products.
“A lot of people are thinking about locking their money for a long run of say 15-20 years in insurance products as interest rates are falling down,” he added.
Besides, Gandhi said that the insurance penetration (the ratio of premium underwritten in a particular year to the GDP in that year) may go up vastly because of the pandemic.
Insurance, he said, is now becoming a pull product from a push product, explaining that earlier the insurers had to go and tell the customer and explain about the product but now “it is for the first time in at least 10-20 per cent of the cases, the customers are asking what products do you have”.
If this ratio goes up to 30-40 per cent, it will change the life insurance industry, Gandhi said.
“Currently, the insurance penetration is less than 4 per cent, if it increases it can become really big. Probably because of the pandemic there is fear psychosis and people are driven to buy insurance,” Gandhi said.
However, the premium cost may go up as the shift towards buying more of protection intensive products than investment/savings means shelling out more money to buy/enhance the life cover, he explained.
IndiaFirst Life, which has seen degrowth of 14 per cent year-on-year in the first half of the current fiscal year because of the pandemic, hopes to clock an overall positive growth in the current fiscal year, he said, adding things are looking better now.
“In the first quarter of the year, we degrew at about 40 per cent and in the second quarter (July-September) we grew at about one per cent. For the first half (April-September), we have degrown at about 14 per cent.
“But the degrowth we saw in March and thereafter is no longer there. So now we have got back to steady phase. We are now looking at some sort of growth. As the situation improves say in the next three months so what we are tracking at this point of time is approximately a 5 per cent year on year growth in first year premium income,” Gandhi said.
IndiaFirst Life started as a joint venture between Bank of Baroda, Andhra Bank (now Union Bank of India) and Legal & General. In February 2019, Legal & General sold its stake to Carmel Point Investments India Pvt Ltd (a Warburg Pincus LLC owned private equity).
Company’s shareholding pattern as of now is Bank of Baroda 44 per cent, Union Bank of India 30 per cent and Carmel Point Investments India Private Limited 26 per cent.
On being asked about company’s listing plans, Gandhi said, “No imminent plans as of now and it is a shareholders’ matter.”
However, talking about the proposed listing of insurance behemoth LIC, he said it will make the market interesting.
“LIC listing will be interesting for sure because the amount of disclosure that LIC will have to make will increase multi-fold. So everybody will be willing to see the LIC IPO, it will make the whole industry way more transparent from what it is currently,” Gandhi added.
Beginning operations in November 2009 as the 22nd private sector player, IndiaFirst Life as on March 31, 2020 was at 12th position in terms of individual new business premium. The company ended FY20 with Rs 3,360 crore worth of total premiums collection and AUM of Rs 14,723 crore.