Pramerica Insurance retains Rs 3,000-crore FY26 target despite MFI slowdown impact: CEO

What has been happening in the life insurance industry lately? It seems like claims have been dropping for a few months now. Are the surrender value regulations still affecting profitability?

Yes, there’s definitely a lingering impact from those changes. Most of the necessary adjustments have been made, though a slight residual impact remains in certain areas. We’re currently in the process of finalising our books, which should be completed in the next couple of weeks. Once that’s done, we’ll have a clearer picture of the total impact. Like the rest of the industry, we’ve shifted our focus to quality and persistency, realigning our commercial strategies and incentive structures. Overall, we’ve largely managed to soften the blow from these changes.

How does your product mix look these days? I believe your focus has mostly been on traditional products, and you’re just starting to grow your ULIP offerings. ULIPs is still under 10 percent of your portfolio, right?

Here’s a rough breakdown of our current product mix: about 90-92 percent of our offerings are traditional products, with a strong emphasis on non-PAR (non-participating) plans. You’re aware that we have a key strength in serving Indian army personnel and various paramilitary forces. For this group, we’ve found that certainty and guaranteed payouts are critical priorities. Given the nature of this segment, we’ve deliberately chosen to focus on products that minimise the risk of mis-selling or confusion around benefits. That’s why 90-92 percent of our retail product mix is non-PAR, while ULIPs account for roughly 8-10 percent, as you rightly noted. That said, we’ve been working to diversify our distribution channels over the past couple of years. We’re building out our broking and agency networks and setting up some direct sales teams too.

How much do you expect that 10 percent ULIPs share to grow? What’s your ideal product mix looking like?

I’d say an ideal product mix would have each of the key categories: participating, non-PAR and ULIPs, falling between 25 percent and 50 percent. The exact balance would depend on factors like our channel mix, customer segments and the company’s financial profile. Some categories might skew higher, others lower, based on those dynamics. For instance, you’ve probably heard from other industry folks that margins across the sector have dipped as the share of ULIPs has increased. Companies focused on optimising their ULIPs might aim to dial that back. For us, though, we’re in a phase of diversifying our product mix to make it more resilient, not just chasing top-line growth, but also balancing capital efficiency and meeting the needs of different customer segments. That means we’re intentionally looking to boost our ULIPs proportion.

So would it be fair to say that in three to four years you aim to increase your ULIP exposure to 50 percent?

Yes, I would say so.

You had said earlier that you are targeting Rs 3,000-crore gross of written premium by FY26. Given the market situation and how MFIs have been performing, considering a large part of your business is dependent on MFIs, are you still aiming for this number?

Yes, it is true that economic factors have hit some of our business lines. Looking back at FY25, the microfinance industry faced significant shifts due to various challenges, as you rightly pointed out. The NBFC and HFC (non-banking financial company and housing finance company) sectors also went through changes. Within HFCs, for instance, affordable housing grew differently than prime housing. These industry-wide factors make it tough to predict the trajectory of our group business, which relies heavily on sister industries we work closely with. If the economy and these sectors perform well, we’re targeting that Rs 3,000 crores GWP for the current financial year. Our group products include employer-employee solutions like funds and group term insurance, with credit life (a product that pays off the customer's debts if he or she dies) where the balance , where microfinance accounts for 30-40 percent of the portfolio, being a key component. Credit life supports MFI customers in tough situations and protects MFIs from non-performing assets by covering outstanding loans. However, economic slowdowns or weaker MFI growth directly impact our insurance sales and projections. We are however still hoping to reach the Rs 3,000-crore mark.

We’ve noticed many foreign companies pulling back, even though they’re eager to invest in a market like India with its huge potential. Meanwhile, Indian companies often say, ‘We’re well-funded already, so we don’t see the need for external investment, and frankly, we’re not keen on sharing the control we could wield.’ Prudential holds a 49 percent stake in your company. Where do you currently stand with Prudential?

Prudential has been our shareholder since 2008, a solid 17-year partnership. Over that time, the Indian shareholder has changed a couple of times, and we’ve faced some rough patches, especially between 2018 and 2021. Through it all, Prudential has stood by us. If you compare us to our peers, smaller players in the Indian market, our metrics like persistency, customer complaints, and claim settlement rates stand out as pretty solid. For a company our size, one that’s seen plenty of change, maintaining that level of quality in business and performance is a real strength. A big part of that credit goes to Prudential’s unwavering support.

Are they planning to raise the 49 percent stake?

That’s between the shareholders. There’s a process to follow before anything’s finalised, including regulatory guidelines and approvals, so there are still steps ahead. But that’s for the shareholders to sort out. Our focus is on running the company effectively, keeping all stakeholders’ best interests in mind.

Has Pramerica Life Insurance gone live with Bima-ASBA?

Bima-ASBA is in the final stages of integration, but it will take a bit more time to fully launch. Some operational details and pending discussions are likely causing the delay.