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Insurer to hire more agents, development officers: D.K. Mehrotra.

The growth strategy: Mr D.K. Mehrotra, Managing Director, LIC. -

With almost two dozen players fighting for new customers, life insurance market in India has become extremely competitive. Yet, Life Insurance Corporation , the market leader, has been able to increase its market share from 61 per cent to 65 per cent last fiscal. According to Mr D.K. Mehrotra, Managing Director, LIC, providing the best of products and services to customers is the key to maintaining market share.

In an interview to Business Line, Mr Mehrotra, who decides on the sales and marketing strategies at the country's largest insurer, talks about the company's growth plans and the increased focus on customer services.

With Indian economy looking up, do you expect a better growth in new business this fiscal?

We had a 33-per cent growth last year. In a competitive environment, we cannot say that we will grow at the same rate this year. Any growth has to be supported by proper infrastructure. This year, we have targeted to collect Rs 54,000 crore in the first premium income and sell 4.66 crore polices - that will be a 25-per cent growth in new business premium and 20-per cent growth in policies.

Will the new regulation asking agents to disclose commission on ULIPs impact its sales?

I don't except a big impact . Initially, there will be a setback because of the mind set. But in the long term, the customer will understand that agents are working for that commission. In India, insurance is still a push product. We have not reached that level of financial literacy where customers will buy policies on their own. Policies still have to be sold. And the intermediary needs some remuneration for selling the product.

Agents still contribute a large chunk of your new business. What about developing new channels?

Of the new business, more than 90 per cent comes from agents. Alternate channels are picking up The bancassurance contributes hardly three per cent. We have tie-ups with banks and corporate agents. Contribution of alternate channels should grow to 5-7 per cent.

We started the 'direct channel' last August. This online service was aimed at tech-savvy people who have little time to visit branches. The first step is 'lead generation'. When the customer shows interest, it is captured by the server and is passed on to the direct sales executive who approaches the customer. It is a virtual office for the customer.

Are you hiring more people?

We have around 14.5 lakh agents. We plan to have a net addition of 20 per cent this year. One agent from our Goregaon branch - Mr Chetan Desai - sold more than 44,000 policies last year and plans to do more this year. We plan to add 5,000 development officers this fiscal to our existing strength of 25,000.

How do you motivate your agents?

We conduct post-recruitment orientation training. Last year, we covered around four lakh agents. We are continuing with that training this year. In the training module, we tell them about the product, the fee, how need-based selling can be done. That is the only way they can educate the customers. Last year, we started the concept of senior business associates. They are development officers who work at very low costs.

To those who are working at less than 3 per cent of the costs, we offer reimbursements of certain office costs and other support. Last year, we selected around 550 such officers. They brought in Rs 2,600-crore premium. This year, we are trying to take this number to 1,000. It's a voluntary scheme.

How were the renewal premium collections in 2009-10?

We are doing well. Our persistency must be around 95-96 per cent. In 2009-10, according to provisional figures, our renewal premium were up by five per cent to Rs 1,02,812.65 crore.

How are you tackling the problem of mis-selling?

So long as conventional products were the main stay, there was no talk of mis-selling. It is only when ULIPs took centre stage, all these came. If ULIPs are positioned as investment products, naturally it can be mis-sold. But if they are positioned as an insurance product, it cannot be mis-sold. The products should be sold as per their core value, i.e. risk coverage. Once this concept catches on, mis-selling will stop. We tell our agents not to sell ULIPs as investment products, but sell them as insurance products with a built-in investment element.

How are your rural sales?

In 2009-10, a little more than 26 per cent of the business came from rural areas. Competition may be in the metros, but real insurance need is in the rural areas. Our presence is strongly felt there through our micro-insurance scheme where we sell policies to people below the poverty line. Last year, we sold almost 15 lakh micro policies. As per IRDA regulations, we are expected to do around 25 per cent business in rural areas.

How is your international business? Are you looking to enter new markets?

In 2009-10, Bahrain and Fiji did very well. Mauritius was reasonably good. We have started our representative office in Singapore. We are awaiting the licence to commence operations through a wholly-owned subsidiary. Once that goes through and depending upon the success, we will try in other countries where there is large Indian population. Singapore can be used as a hub to expand to other neighbouring countries. The UK business is slowly showing some signs of improvement. We had problems there because of the strict regulatory requirements and difficulty in finding sales intermediaries. Only local people can be employed as sales intermediaries. We are now offering policy portability. There was some problem earlier as certain products offered there did not have a matching product here. The actuarial department has now taken care of it. At present, international business accounts for 2.5-3 per cent of our total business. We are trying to increase it to 5-6 per cent.

Have you been able to control your expenses?

Our overhead and management expenses are coming down. Overall expense ratio has come down to 10.37 per cent from 12.15 per cent.