Crisis is a passing phase, we will only emerge stronger

With almost a flat growth in FY09, the ���going��� has become extremely tough for the life insurance industry. MetLife has been one of the few companies that have gone against the tide and grown in a decelerating market. The growth has been on the back of a renewed push by its managing director Rajesh Relan coupled with huge capital commitments from its promoters. While one of its minority shareholders ��� J&K Bank ��� could face constraints in making further investments, this is not seen as a problem because other shareholders are likely to pick up shares. In an interview with Mayur Shetty, Mr Relan talks about his future plans for MetLife.

How has the subprime crisis affected MetLife, globally?

MetLife is the largest insurance player in the US and has moved up to the 39th position in the Fortune 100 list from 43rd last year. The subprime crisis has had a minimal impact since globally we have very little exposure to the most troublesome aspects of subprime.

MetLife does not insure subprime mortgage securities. Globally, MetLife���s ratings are among the highest in the industry. As of December 31, 2008, MetLife Inc���s excess capital position was in excess of $5 billion, which we believe is higher than any of our US competitors.

Your growth rate of close to 40% has been among the highest in the industry. Can you sustain this growth rate?

We closed FY09 with annualised first year premium of Rs 1,185 crore, a growth of 40% over last year. The current economic slowdown has been impacting the economy and we do not expect to be insulated from the rest of industry. I would expect the current market scenario to be a passing phase and all of us will only emerge stronger from this.

We were among the top three fastest growing companies in the last quarter. Unless the life insurance industry is hit by some unprecedented or unforeseen events, we are confident that we would continue to grow during the year.

In the context of current economic slowdown, how do you plan to improve productivity and persistency?

The current economic slowdown has brought productivity and persistency on the top of our priority list, as any slippage could breed inefficiency. We have healthy persistency levels, which have been maintained through customised retention programmes for our distribution channels that are measured down to the last level.

To provide ease of collection, we have increased our customers��� payment options for renewal payment to more than 9,000 touch points across the country. We provide a superior customer service, in-time query resolution to our policyholders and intermediaries during this challenging environment.

We have heard J&K Bank is facing some constraints to increase investment in MetLife?

MetLife India is a well-capitalised company with strong shareholders who have made timely capital contributions. We are not in the know of any such constraints and any comment in this regard would be merely reacting to a speculation.

When do you expect to break-even?

With increased investments into growth, profitability tends to get deferred, as investments only pay off after a long gestation period. We, therefore, have to take a balanced view to grow our business and achieving profitability. We continue to work towards break-even as envisaged in our current plan, which could change depending upon the improvement in the economic climate leading to increase in investments.

MetLife has a strong dependence on bancassurance for distribution. But recent experience has shown that bank partnerships can be fickle. How do you plan to take this forward?

At MetLife India, we have adopted a multi-channel distribution approach, as the customer needs to be tapped through the channel of their convenience. Like all partnerships, bancassurance partnerships are also driven by business priorities and strategies which may change, as we have seen a number of banks forming their own insurance companies.

In any case, as the industry is evolving, we expect the restrictions of single insurance partnerships to be removed, which will eventually establish bancassurance as a sustainable channel for the insurance industry. For our part, we would continue to focus on improving the value we bring to our bank partners that help them grow their business and profitability.

The Indian life insurance industry has shown negative growth and private insurers have hardly grown. Do you see growth rates improving this year?

Even during this slowdown, life insurance industry continues to perform better compared to the rest of the domestic financial services industry. In my opinion, a slowdown for a year or two should not lead us to believe that the market is saturated.

As the economic scenario improves, the growth will return, though it may not be to similar levels. Life insurance contribution to GDP is still very low. And in the long run, there is a huge potential for increasing penetration.

The share of ULIPs has gone up after you took charge. With the downturn in the market will you change your product strategy?

ULIPs have been in demand owing to their transparency and ease of sale by intermediaries. Due to the recent market volatility with diminished market returns, we are witnessing a shift in the customer and intermediary preference. While customers are seeking guarantees, intermediaries have realised that their advice, too, needs to be in line with the customer���s demand.

This has seen a spate of new products, showing a shift towards traditional products. We have always believed in having a balanced portfolio. In fact, 25% of our policies sold during the last quarter are traditional policies and the trend is likely to sustain through this year.

There is a proposal to have uniform nomenclature for charges to improve transparency. What is your stand on this?

We support all initiatives to increase transparency. We support the standardisation of nomenclature since we think that it will benefit the customer and reduce sales malpractices. Also, we have to remember that this should not stifle innovation.

However, it is important to differentiate between standardisation of nomenclature for charges and standardisation of charges themselves. I do not think the industry is ready for standardisation of charges since life insurers are at different stages of evolution and therefore at different cost structures.

Standardisation of nomenclature should not lead to standardisation of charges, as it would only reduce competitiveness and stifle innovation.