Shikha Sharma
Thank you, Phong. You just heard from Phong the brilliant growth and leadership story of Vietnam. When we started operations in India, our ambition was actually to replicate the Vietnam story and to build an early market leadership in a market, which we thought is going to be promising not just in terms of size for growth opportunity. As you’d be aware India has a population of over a billion, set over a diverse geography. While life insurance is fairly well known in the market, life insurance premium is still only 2.2% of GDP. So penetration level is still much lower than other markets at a similar stage. Price deregulation in 2000, the life market in India was a public monopoly, post the opening up of the market, 13 new players have entered the market, a lot of them with strong international brands. Prudential was the first private sector company to open up market once new licenses were given.
Our entry strategy was through a joint venture with ICICI, today after 4 years, although still a very small part of the overall market, we are the clear leaders amongst the new players in the market. Until 2000 ICICI was the only life company, and the key challenge for us is really how to position ourselves against the company which was synonymous with life insurance, and which has right distribution. It has over 2,000 offices and over 800,000 life agents. And to make it more difficult, ICICI at that point of time offered a whole lot of guarantee return products, some of them at rates much higher than markets and these were back off as supplement guarantee.
On the flip side however, there was very little product innovation and there was very little focus on customer, as a result most affluent customers did not see life insurance as a key element of their financial portfolio and even where they did buy a policy, there tends to be a high degree of under insurance. It’s in this context that we saw a significant opportunity in the market and enter the market through a JV with a strong respective local partner. Our key objective was to build a sustainable franchise to deliver differential values to the customers because that is what we saw as a chink in the amour as far as LIC were concerned. With this in mind we focus on building a super brand and a comprehensive set of products which were cost effective and designed to meet consumer needs.
Given the diverse geography and demographics of the markets, we chose to start business with a multi channel platform, so with a strong focus on agency. We also invested very early in a strong operation infrastructure because if we were sure short skills were going to happen sooner and we invested ahead of actually reaching volume. One of the key dilemma for us at that point of time was shopping strategy, we have the option of hiring staff from being incumbent clear, but we chose instead to built a new team with diverse talent based on skills and attitude rather than domain knowledge, and this is why given the option for us given Prudential wide experience that implementation in the Asian market and our ability therefore to do rapid knowledge transfer from other markets.
When I look back, a lot of people have asked us how we manage to get the kind of leadership we did despite a highly competitive market and very strong brand name have been come to the market the same time that we did. I think one of the key reasons for us success has really been the complimentary strength of the two partners. ICICI was of course a very creditable local brand with dominance in every sphere of personal financial services. It has wide branch distribution, customer base of almost 10 million customers, and was seen as a market innovator. Prudential at that point of time had been operational with the active management company and had therefore a small but increasing brand recognition of the marketplace. Prudential was strongly identified with the cricket club, the last world cup that India won was sponsored by Prudential and therefore Prudential was close to a lot of Indians’ hearts. But most importantly, Prudential had the experience of starting up and running several successful life operations in Asia and we were able to draw on that expertise. I think is this coupled with a strong and adequate government structure, which really allowed us to get a head start in establishing presence in the market.
We started cautiously in the first two years because we had a fresh new team, most of us with no life experience before we got into the company, and we wanted to establish the viability of our life operations model before we scaled up. But having fit the core management team in the first two years, and seen the earlier experiences of managing both skills with the quality of portfolio, we expanded there quickly after several key insurance markets. As you can see today we have almost 88 branches, with more than 40,000 tied agents working for us. Having established an actual footprint, our focus going forward is really going to be a hard to get greater penetration into these markets.
When we started, the only form of distribution in the country was tied agency and there was no model for bancassurance. We were one of the pioneers in terms of developing an operational bancassurance model and we worked closely with the regulators in coming up with enabling regulation. We also started early in terms of developing bank relationships with some financials banks. So today we have a diverse set of bank relationships other than ICICI, these range from a dimension of large nationalized banks, some strong regional banks, and a few state specific relationship. In India, bancassurance still needs to be tied to one insurance player, so we think we have a competitive advantage of having this wide range of relationships. It also give us factors of several democratic segment of the markets, but 2-3 years ago we also started to invest in direct channels including the internet and while this is a very tiny fraction of our business it is 3% of new business premium, it again diversifies the customer base that we are targeting and gives us access to the younger educated customers who want to do things themselves. Non-agency channels put together account for almost 30% of our new business premium today.
As I mentioned earlier we have a strong product portfolio and that was one of the key strategies we started out with. We were the first insurer to focus on retirement as a special category by building both a dedicated set of products and a dedicated retirement solution brand, and we did this while people were still trying to figure out whether to look at the pension segment and how to think about it.
I would just like to take a few moments here to show you one of our retirement plans.
[TV Commercial]
This ad was actually seen by a lot of people as celebrating and identify us very closely with retirement and pensions arena in the country, and I think it had a significant role to play in our achieving a dominant position among the private players where we have more than 2/3 of the individual pensions market among the private players and over a quarter of the total market. This applies to private sector companies that really make a big break through in terms of penetration in the overall market.
This slide is just to reiterate the fact that we focus on a range of products and we focus on a range of products that cater to diverse needs and to diverse income segments of the market given the diversity of the Indian market itself.
By branding and distribution it definitely gives us an early advantage, we were clear that to build a long-term sustainable advantage we needed to have a deeper understanding of our customers’ needs and be able to cater to them on a continuous basis. So we put in lot of initiative in that regard into the company but the only one I would like to touch upon here which I think had the maximum impact in terms of building a customer conscience culture in the company and also helping us stay in tune with changing consumer demands and redesigning our products to cater these demand is something that we instated some year back where all the senior management of the company and this is like the top 30 people in the company, go out and meet customers face-to-face, one-on-one at least once a month and this gives us greatest insight in terms of telling us how the whole distribution structure is performing, what’s doing well and where we need to improve.
A lot of people, the disbelievers have asked with fast pace of growth how we assure about the quality of business and quality of the portfolio that they are building. This has mentioned what give us the confident to peruse our growth aggressively is the fact that we put in place very early, strong risk control processes in place, strong processes in place to measure operation efficiency and delivery processes and that was begin to think of the points to let us know that we were able to scale up rapidly without compromising either in the quality of portfolio or the quality of service delivery.
If you look at our ratio in terms of claim experience or personal experience as compared with the rest of the industry, we consistently done better than the rest of the industry for all of last 3 years that reports that are available. In most customers satisfaction services as well, we rank ahead of the competition. The results of all of these initiatives despite being really young company we’ve had exceptional recognition. We’ve won the outlook money award, the only award for students in India for life insurance companies, we have won 2 years in a role and we hope to win that next year as well.
The brand is very well recognized, so we have 92% overall brand recall in the market and 54% intention to buy, which I think is the really important think people want to buy life insurance during the next year, 54% of them would consider buying ICICI Prudential policy. If you look at that of our nearest private sector competitors, that is almost half the intention to buy that people have with us.
We’ve seen more than triple digit growth over the last 3 years since inception and we remain the dominant player in the market, the private market with over 1/3 market share. We recently crossed the 1 million policies mark and I believe that’s one of the fastest for any new insurer coming to Asia, similar to Vietnam I guess. But the first three quarters of this year, our new business premium is still showing sustain growth and we have done 93 million pounds of premium in the three quarters.
We believe that these regards have really been the consequences of constant innovation and new initiative enabling us to continuously stay ahead of the market. Going forward we see enormous opportunities in the market both of untapped customer bases as well also those under insurance. We cover today 67% of the urban market and the urban market is actually less than half the total market for the country. But we cover 57% by way of branch presence, even in these markets we have branch presence we still have a fairly low degree of penetration in the consumer base so our total penetration in the market in these cities is less than 10% where high net worth section is still under 2% and we are looking at growing our distribution with cities with existence which means we leverage the infrastructure that we have lessen over the last four years.
As we look at the next stage of evolution of the company and we look into expanding our distribution even further, we are actively looking at following a segment of the group agency management, managing all agent in the same way. We started a couple of experiments in the arena in the last year and they have begun to pay off. And as we scale this up, we expect to see pay off by way of improved productivity. We are also looking at new service delivery model as I mentioned we have branch infrastructure to cover 57% of the urban market and we are looking at urban model and to see how we can leverage this infrastructure and get higher return on our investment.
We believe that continuous product innovation and quality of the talent that we have has been a key differentiate for us and has been important in our achieving market leadership. Going forwards we are going to continue to invest in production innovation and ensuring that we have the best talents in the market and they are growing with us continuously.
So in summary the past few years has been for me personally a rewarding experience in terms of having set up market-leading business. I believe that this is really just the beginning the task so far has been to set up the platform to build the organization capability and to create a differentiation in the market. Having done this, we think we are actually in a privileged position, most estimates including that the growth in the market to be in excess of 15 – 20 % over the next 5 years. And private players only expect to increase the penetration in the market. Currently private penetration in the market is about 18 – 20% and over the next years, I guess the expectation that it could go upto 50% at least. And we believe that we are well positioned to take advantage of this opportunity and to capitalize on what we’ve built so far which is why we believe this is only the beginning and we have lots of growth opportunities going forward. With that I'd like to hand it over to Captain Chia to talk to you about China and the interesting opportunities there. Thank you.
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