'No Indian insurer can ignore bancassurance'

'While we expand into other areas, banca remains our primary channel, and we continue to be a banca-led organisation.'

Bancassurance channel recently came under scrutiny due to reports of mis-selling of insurance products.

There were murmurs of regulatory clampdown too.

The sector, meanwhile, is growing at a fast pace and has also done some course correction.

Rushabh Gandhi, MD & CEO of IndiaFirst Life Insurance, told Aathihra Varier and Subrata Panda/Business Standard that their grievance rates were at the lowest since inception.

Gandhi also said that the firm will continue to be bancassurance-heavy, even as it diversifies into other distribution channels.

Gandhi also discussed the company’s growth and listing plans going forward.

How has the year been for you so far?

The first quarter of the ongoing financial year (Q1FY26) was impressive, with overall growth reaching 44 per cent.

Bank of Baroda channel increased by 22 per cent, Union Bank of India channel saw a 17 per cent rise, and our agency business is now performing 5 times better than last year.

Amalgamation in regional rural banks (RRBs) impacted their distribution capacity in Q1, but we are seeing green shoots and expect it to stabilise in Q2.

Now that the core restructuring within RRBs is complete, we look forward to getting enhanced share as regards the life insurance business.

What about profitability?

In spite of the significant investments in the agency channel, we expect the year end value of new business (VNB) margin to be substantially better than last year’s VNB margin of 17.6 per cent.

What is the rationale behind investing so much in the agency channel?

There are opportunities both within and outside banks.

We have access to around 250 million customers through Bank of Baroda and Union Bank of India.

But there are over a one billion Indians who are not with these banks.

While bancassurance remains our core business, our agency business too is doing well.

We ended last year at over Rs 100 crore.

This year, we expect the channel to cross Rs 200 crore.

By year-end, we will have 96 branches and more than 10,000 agents.

What is bancassurance’s share in your business?

In Q1, bancassurance accounted for approximately two-thirds of our business.

The balance one-third was equally split between agency and the rest of the channels including but not restricted to broking, direct, and digital.

This is a significant change from a couple of years back, wherein bancassurance contributed to over 90 per cent of our total business.

Are you not concerned about clampdown on the banca channel?

Banca is still at the heart of our business.

This year, our 13-month persistency rate is set to reach an all-time high, and our grievance rates (in banca) are the lowest they have been since inception.

We have proactively worked to achieve these results.

With the quality parameters improving and the shared vision of ‘Insurance for all by 2047’, I am not overly concerned over the clamp down on bancassurance.

While we expand into other areas, banca remains our primary channel, and we continue to be a banca-led organisation.

Love bancassurance or hate bancassurance, no Indian insurer can ignore bancassurance.

Will you get into health or general insurance?

We will wait for the final regulations before making any decisions.

Currently, our shareholders do not have any ownership interest in any health or general insurance company.

There are some obvious synergies between life insurance and non-life insurance, especially health insurance.

Furthermore, we are developing our agency channel, and many agents already sell both life and health insurance.

While combining these opportunities could be beneficial, we will await new regulatory guidelines on composite licenses before proceeding.

What is the status of the IPO?

The IPO was never shelved. It was deferred and that is precisely what the status is as of now.

While the last 2 quarters have been encouraging, maintaining consistent growth over the next few quarters will be important.

In addition to a stable growth path, limited headwinds, and increased tailwinds, along with supportive market conditions, are necessary for the IPO to be successful.

The timing will ultimately be determined by our shareholders.

In this interest rate environment, how do you manage the returns?

We maintain a minimum 200 bps gap between customer returns and our expected investment returns.

This not only protects the organisation, but also ensures the customers enjoy attractive, long-term guarantees.

For premiums up to Rs 500,000, returns are tax-free, which further enhances customer outcomes once grossed up for tax.

To manage interest rate risk, we run a robust bond forward rate agreement (FRA) program, with nearly 75 per cent of our portfolio hedged, which provides stability even if the rates decline.

But with LIC entering the FRA market, is there a problem with supply?

Currently, we are not seeing any excessive short supply of FRAs.

When are you moving to bond forwards?

Bond forwards serve a very similar purpose as FRAs.

Currently, the preferred hedging instruments are FRAs.

Going ahead, bond forwards may be preferred to FRAs.

We are minutely observing the evolving environment and shall make the transition when it is in the best interests of IndiaFirst Life.