LIC had earlier this year bought into the lender. IDBI Bank now sells a large portion of LIC policies that has hit the sales of IDBI Federal Life policies
Private life insurance company IDBI Federal Life Insurance is looking to build business through the proprietary distribution channels.
In an interaction with Moneycontrol, Vighnesh Shahane, MD & CEO, IDBI Federal Life Insurance said IDBI Bank has now gone slow on selling IDBI Federal Life policies since they have started selling products of LIC.
IDBI Federal Life Insurance's parent IDBI Bank is now owned by LIC after acquiring 51 percent stake from the government. LIC also infused Rs 21,000 crore in the bank as a part of the stake purchase process.
“We have seen a 60 percent drop in the business from IDBI Bank since they are now required to sell LIC policies because the latter is their major shareholder. They used to be a dominant contributor amounting to 50 percent of the business written. This is a big hit. To deal with this, we are incubating and growing proprietary channels including growing agents, direct, online, group and brokers,” said Shahane.
Shahane said there is still uncertainty as far as the business is concerned. IDBI Bank is looking to sell its stake in IDBI Federal Life Insurance.
“They (IDBI Bank) want to monetise their stake in IDBI Federal Life. This process started one month back. We need to see who steps in, how fast and in what capacity. In the interim, we are continuing with our business with proprietary channels,” he added.
IDBI Federal Life Insurance is a joint venture between IDBI Bank, Federal Bank and Belgian insurer Ageas. IDBI Bank holds 48 percent stake in the venture while Federal Bank and Ageas hold 26 percent each.
In May 2018, while IDBI Bank was close to a stake sale in the life insurance company this deal could not be completed due to valuation concerns. Now with LIC as the majority shareholder, the stake sale process has to begin afresh.
Dip in the premium collection, but profit stable
IDBI Federal Life posted a 15.3 percent decrease in new premium collection for the April-July period collecting premium of Rs 150.83 crore.
“The topline growth will be impacted for the short-term, maybe for the next 3-6 months till we get a replacement (to IDBI Bank after it sells stake),” he explained.
With respect to the distribution, Shahane said that the company is focussing on the other banks through open architecture process. The insurance regulator has allowed banks to sell three life, three non-life, and three standalone health insurers.
The company, however, remains profitable. In July 2018, IDBI Federal wiped out all accumulated losses. IDBI Federal Life Insurance reported a 30 percent year-on-year growth in net profit in FY19 to Rs 133 crore.While there was an 8 percent growth in total premium to Rs 1,933 crore in FY19, there was a 3.2 percent drop in new premiums to Rs 806.62 crore.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.