Sales perk up

Vijay SinghHe is a man who likes to walk the talk. Sitting in his second floor room at Ahura Centre, Mumbai, Mr. Vijay Singh, director, of the Canada-based Sun Life Financial Services and, currently, heading Birla Sun Life Insurance Company, talks about corporate transparency being the single rule of thumb the company would be following.

According to him, more than anything else, the important barometer of corporate transparency is the extent of information given out in the company's balance sheet and spelling out everything about the company's product in bold print.

On both the counts the Rs. 120 crore equity based Birla Sun Life – a life insurance joint venture between Sun Life Insurance, Indian Rayon and Industries and Birla Global Finance - scores far better than some of its contemporaries.

For the Canadian financial giant Sun Life, the relationship with the Indian group is deep encompassing most of the financial sector activities. "We have tie ups in mutual fund, stock broking, financial marketing and now in life insurance," Mr. Singh explains.

The 1968-batch chartered accountant Mr. Singh, Sun Life's Indian representative was earlier with IBM and was instrumental in the Tata-IBM joint venture. Today, though heading the insurance outfit he says that it is only a temporary arrangement. "I am actually scoutingfor a suitable chief executive for Birla Sun Life Insurance," he says.

While the search is on Mr. Singh and his team is busy marketing the company's three unique products – once again, a case of walking the talk.

Most of the new players who promised innovative policies during the run up to the insurance sector liberalisation later failed to honour their word. "Only endowment and money back policies are popular and hence we are marketing the same," responded a chief executive of a new life insurance company.

But Birla Sun Life is refreshingly different.

"As per our survey Indian people need world class products and services though they are familiar only with endowment and money back life insurance policies," Mr. Singh remarks.

This gave Birla Sun Life the impetus to introduce three products viz `Flexi Save Plan' (endowment policy), `Flexi Cash Flow' (money back policy) and `Flexi Life Line' (whole life plan) with innovative concept of guaranteed returns and interesting add on covers/riders. The three policies could be said as a hybrid of mutual fund and life insurance cover.

Gopalakrishnan"Even Life Insurance corporation of India (LIC) doesn't guarantee returns," claims a proud Mr. K. S. Gopalakrishnan, associate director, actuarial.Apart from minimum assured returns Birla Sun Life gives the policyholder three investment options, liquidity upfront to withdraw money, flexibility in payment of premium.

The other positive factors that one finds are: defining in advance the surrender value of the policies, not penalising the policy holder when a policy is surrendered after fourth year of purchase, offering the policyholders a 14 day free look period – the time within which the policyholders can cancel the policy and get full refund.

"I will have cancellation before 14 days and not 14 years later. We expect around 2 per cent cancellations," remarks Mr. Singh. The underlying principle is that even a single policyholder should not feel that he succumbed to high-pressure sales tactics of an agent.

In the event of a policyholder failing to pay the relevant dues, Birla Sun Life will adjust the premium amount from the policy's surrender value for a nominal charge. When one contrasts this with LIC that forfeits crore of rupees due to policy lapses, it is clear that the new player is now setting the industry standards.

Sales perk up

Be that as it may, starting its operations on 19 March 2001, Birla Sun Life closed its first fiscal with a premium income of Rs. 32.35 lakh from 286 policies. "Till date we have sold more than thousand policies," updates Mr. Gopalakrishnan.

The company earned Rs. 1.5 crore from its investments. With start up and operational expenses initially being high and after depreciation and other provisions, the net loss stands at Rs. 8.3 crore. As a prudent underwriter, Birla Sun Life is reinsuring its risks with an international reinsurer and limiting its exposure on every life to a maximum of Rs. 5 lakh.

The company, as per plans, will break even on selling 5 lakh policies by sixth year of operations. Accumulated losses will get equalised by eighth year if every thing goes as per plan.

As per initial budget, the average premium per policy is Rs. 6,000 per annum but the actuals are 2.5 times more than that remarks Mr. Singh. However the launch of products catering to rural folk to satisfy the regulatory norms will bring down the average, he adds.

Targetting workers employed in Aditya Birla group factories located in backward areas and later focussing on micro financing groups Birla Sun Life intends to satisfy the rural business obligations. Only after saturating the above two avenues the company will go for rural branches.

Like all other new players Birla Sun Life is no exception in using LIC's mortality table in fixing its premium rates. Justifying the non revision of LIC's table to reflect the increased life expectancy and charge a lower premium Mr. Singh says, "Pricing is one point whereas as total value offer to the customer is different."

The service value he refers to include deputing a mobile medical laboratory to do the necessary medical tests to a prospect residence rather than asking him/her to get the tests done somewhere. By this manner the company avoids acceptance of bad risks on the basis of a false medical test reports.

As for additional funds that the company would need Mr. Singh says around Rs. 350 crore will be needed over next five years and the promoters are well set to infuse the same.

Carrying on its operations from three branches in two cities viz Mumbai and Delhi, Birla Sun Life will soon be opening branches in Chennai, Calcutta and Bangalore by this September and two more before the end of this fiscal.

"Our plan is to have our foot print in 20 top cities in India," says Ms Anjana Grewal, associate director, business development. And till such time the company gets a critical mass of clients, policies will continue to be issued only from Mumbai.

To achieve that Birla Sun Life apart from the traditional individual agent channel – the company currently has around 1,500 agents – has signed memorandum of understanding with Citibank, Deutsche Bank and Dewan Housing Finance to distribute its products.

"Certain insurance products needs different distribution channels," reasons Mr. P. Nandagopal, associate director, alternate channels. The other channels he is looking at are brokers, corporate agents, internet and call centres for tele marketing.

Alongside Birla Sun Life is investing sizeable amount in brand building. Last year the promotion bill touched Rs. 2.2 crore and this is expected to go up further.

Brand building assumes importance for private life insurers in the wake of UTI fiasco and other scams that impacted the country's financial sector. Moreover, two public sector giants – LIC and SBI Life- are now playing the safety card.

Agreeing with that is Ms. Grewal clams up saying, "The company's promotional slogan is 'your dreams are our commitment', synchronises the corporate as well as product brand philosophy."