‘IDBI Bank sale not to have significant impact on business’MUMBAI: LIC has said it is in an advantageous position under Irdai’s new distribution norms and it also has taken steps to ring-fence the performance of bancassurance channels despite the impending sale of IDBI Bank – its largest bank distribution partner. Officials cited low expense ratio, diversified distribution network and declining dependence on IDBI Bank.LIC CEO and managing director R Doraiswamy said the insurer’s cost structure gave it an advantage over competitors, even if they reduced distribution costs. “Anybody else reducing the cost of distribution alone will still have to do a lot of work to bring their overall expense ratio to be under that. So, we stand to be on a distinctly advantageous position, and will be closely watching the market as it unfolds,” he said in an analysts’ call.On the proposed IDBI Bank stake sale, Hemant Buch, executive director, marketing, bancassurance and alternate channels, said LIC did not expect a significant decline in business sourced through the lender. IDBI Bank’s contribution has moderated from historical highs to around 20% of LIC’s total bank-driven business and about 30% of its bancassurance volume.“While IDBI will continue to deliver value for us and remain a valued and esteemed partner, we do not foresee much depletion in terms of their contribution and overall impact on the volume of bancassurance-driven performance,” Buch said. He added that LIC was expanding its partnerships with other public and private sector lenders. Govt has recently approved sale of LIC and govt stake in IDBI Bank to Fairfax group.Doraiswamy also said product pricing did not depend solely on the total expenses built into a policy. He said competitors relying more heavily on non-agent distribution channels or lower distribution costs would still need to reduce their overall expense ratios to match LIC’s cost structure.“We would like to protect the interest of our agents in as much as whatever is possible within the regulatory framework, and that is why we have given our specific recommendations on some areas which concern the points raised by the agents’ groups as well. We hope that there will be a good discussion, and when the version of draft regulations are released,” said Doraiswamy.“In last couple of years, in fact, dependence on IDBI has, in fact, moderated. What it used to be around 50% to bank-driven business and almost 40% to total bancassurance business of corporation, it has moderated to around 20% of total and 30% to bank. Further moderation also is, in fact, taking place despite the, in fact, using the fact that IDBI continues to grow, but then, in fact, we also continue to grow with direction coming from, in fact, other partners,” said Buch.Irdai’s proposed overhaul of insurance distribution, which seeks to sharply cut commissions, tighten expense limits, curb bank-led sales incentives and restrict loan-linked insurance bundling, has triggered resistance from insurers, banks, brokers and agents who fear loss of revenue, jobs and disruption to established distribution models, even as the regulator seeks to curb mis-selling and reduce costs for policyholders.
