Canara HSBC Life charts new path to quick profits

By Venkatachari Jagannathan, Chennai, Sep 12 : Upbeat after earning Rs.374 million in just three months from only two insurance products with average premium of Rs.111,144 per policy, private life insurer Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited (Canara HSBC Life) is expanding its product portfolio.

'We will soon launch term, pension, group and health insurance products as they are ideal products to be sold through banks,' Harpal Karlcut, chief executive officer told IANS.

'Our products will be simple to understand and would match competition in terms of product features,' he claimed.

Canara HSBC Life, which has paid up capital of Rs.3.25 billion, is promoted by Canara Bank (owning 51 per cent stake), HSBC Insurance (Asia Pacific) Holdings Limited (26 per cent) and Oriental Bank of Commerce (OBC - 23 per cent).

According to Karlcut the company will be in the black, much earlier than many other players and satisfy the shareholder's expectation of around 15 per cent post tax return on their investment.

The only qualified actuary to head a life insurance company now in India, Karlcut said, 'In a life insurance company most of the cost efficiencies has to come at the distributor end. Our focus is profitable growth and not growth at any price.'

Unlike competition using multiple distribution channels - individual/corporate agents, brokers and bancassurance - Canara HSBC Life is a pure bancassurance player planning to leverage the 40 million customers and 4,000 branch network owned by Canara Bank, HSBC and OBC.

In addition Canara HSBC Life will avoid spending on setting up branch offices, paying huge incentives/commissions to other channels, agents training costs and on head count.

Interestingly, the bancassurance channel has advantages like (a) low cost (b) quality clients which in turn results in big ticket policies with high persistency/continuity rate and (c) better and deeper customer reach.

Queried about the high start up capital despite the above, Karlcut said, 'Our promoters are confident of the business volume we will do and had pumped in required capital. Further we have invested heavily in IT systems.'

The life insurer has tied up with Swiss Re for reinsurance to take care of any major claims outgo.

At present 446 bank branches (Canara 217, HSBC 47, OBC 182) sell Canara HSBC Life's policies and the plan is to increase the total to around 950 bank branches (Canara 500, HSCB 47 and OBC 400 branches) by the year end.

'HSBC has over 700 specified persons - those who are licensed to sell insurance policies - and the other two banks aim to have one dedicated person per branch,' Karlcut added.

The two public sector banks would provide the volumes while HSBC would give the big ticket policies - an enviable combination for the long term stability of any life insurer.

'The acquisition of Infrastructure Leasing and Financial Services Limited (IL&FS) by HSBC would add one more distribution arm to our company,' he said.