Monday, January 24, 2011

The Steve Jobs of Indian Insurance

Innovation seems to know no boundaries these days.

We've come to expect constant innovation and out-of-the-box change from technology leaders like Steve Jobs at Apple, Sergey Brin and Larry Page at Google, and Mark Zuckerberg at Facebook.

But innovation in insurance? In India? You've got to be kidding.

That's exactly what we found this morning here in Mumbai when we visited with Sandeep Bakhshi, chief executive of ICICI Prudential Life Insurance Company Limited.

Joining him, both in the meeting and in his innovation plans, were Judgajit ("Jit") Das, Chief of Human Resources at the company, and Ashish Rao, VP of Human Resources.

First, they said, you must understand the life insurance industry in India. Prior to 1955, there were 230 life companies. Then the government nationalized the industry and there was only one.

Today that company, Life Insurance Company of India ("LIC"), has 300 million policyholders, easily dwarfing every other insurance company in the world when measured this way.

In the early 90s, the government decided it made sense to open the industry to competition again. Prudential was one of the first new companies into the market. Today there are more than 20 major private sector companies plus LIC, still state-owned and still the biggest with 70 percent market share.

Prudential today has 6 percent market share but ranks third in the market with 6 million policyholders.

The company, as a foreign-owned entity, is required to have an Indian partner with majority ownership. As one of the early entrants to return, Prudential quickly entered into a joint venture with ICICI Bank, one of India's largest with more than 2,528 branches across the nation.

This proved to be very smart and, today, the retail bank assurance channel is Prudential's largest source of business, generating more than 35 percent of policy revenues.

The second channel is where the story gets interesting, where the innovation begins, and where Prudential in India may be creating a new model for insurance sales worldwide.

Two years ago, the company had 250,000 agents and required 20,000 employees to supervise these agents.

Then, Sandeep had a brainstorm.

He looked around, realized that his customer of the future in India spoke three languages: English, a second traditional language like Hindi, and a third one that he calls the "language" of technology.

These future customers, Sandeep thought, would be huge in numbers. And, for at least another generation, India will not only grow in population but the median age will continue to get younger.

So, he innovated. He cut 250,000 agents to 130,000 and he cut employment from 20,000 to 14,000.

Then he took his biggest risk of all.

He invested the savings into technology so that his company could learn to sell insurance over the Internet. He took his best and brightest, told them to figure out the insurance sales model of the future, and finally told them that he would guarantee them three years to find success--no questions asked.

All this in a country where the World Bank estimates 80 percent of the population still lives on less than $2 per day. But also a country where broadband is growing at breakneck speed. And where incomes are too.

How's that working out for you, Sandeep?

Well, of course, it's too early to tell. Companies the size of ICICI Bank and Prudential Corporation Asia aren't known for being foolhardy. So they must know something about the future of India and that is very likely to have the word "Internet" in it.

To see the future of India, make an appointment to see Sandeep Bakhsi.

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