A fitness enthusiast, Shuzo Sumi, in his younger days, tried his hand at rowing and rugby. The President and CEO of leading Japanese insurance firm, Tokio Marine Holdings, still climbs 280 steps every morning to reach his office. On a visit to Mumbai to sign a joint venture lead with domestic brokerage firm Edelweiss Capital to start a life insurance company in India, he spoke to Anand Adhikari.
Q Why did it take Tokio Marine almost a decade to enter life insurance in India? You entered general insurance opportunity quite early soon after the insurance sector was opened to foreign players in 2000?
A: We actually took a decision to enter India some six years ago. India is undoubtedly a very attractive market for life insurance business. There is a huge population and the penetration levels are also very low as compared to other countries. We have been studying the Indian market for the last few years. The most important factor for success in any joint venture business is to have the right partner. So we actually took a very long time to find Edelweiss Capital as a partner. Under the Japanese regulations until 1995, we were solely a general insurance company. But when the life insurance regulations were revised to allow more players for healthy competition, Tokio Marine also applied for a life insurance licence. We have a 15-year-old history in the life insurance market in Japan. We are also the largest player amongst the lot that started after the liberalisation of the sector.
Q Is the timing right? The global environment now is one of gloom and doom. India also has its own governance issues and there are regulatory changes in the life insurance sector expected as well.
A : I think the timing is not so bad. We have been preparing for this business for the last two to three years. I'm worried though about the current situation in Europe because of the Greek crisis and the US downgrade by a rating agency. The situation of Europe and the US will surely impact Asia. We are very concerned about it. But we will keep looking for growth opportunities around the world. The Japanese Yen is also very strong. Life insurance is a long term business. We think it is a good time to start setting up infrastructure when the economy is not good. You should never waste a crisis. You always end up acquiring the right habits.
Q We already have more than three dozen private sector life insurance players in India with global partners. Is there space for more?
A: China has 63 players today. By 2050, India is expected to overtake China in terms of the insurance market size. In China, you are required to take permission from every province to set up operations. The popular product is unit linked insurance plans (ULIPS) and the bancasurance channel of distribution is also very popular. We ranked No. 8 out of the 63 players in China. We are one of the fastest growing companies in China. In India, the low penetration level shows a big potential. Our first priority will be to strengthen our own platform and establish our branch network. As per our business plan, we plan to break even in the sixth year. Insurance is actually a capital intensive business where you can make profits earlier if you stop growing.
Q You have a non-bank partner IFFCO in your general insurance joint venture. You are now joining hands with another non-bank partner Edelweiss Capital for life insurance. Is it because you wanted the JV on your own terms and conditions?
A: One of the most important factors is whether the JV partner has the same chemistry or whether both share the same management philosophy and same vision. That's what matters for us. Take for example: we are very clear that the agency channel is a key challenge for us in India. This is our experience in various countries where we do business. If you want to be successful in life insurance, you need an agency network of your own. The insurance business requires services after one sells a policy, and the agency network complements that very well.
Q What is your reading of the Indian insurance industry which is struggling to make profits even in its 10th year?
A: I think there was a rapid growth at the start. The companies witnessed high growth in the initial years. The private sector also contributed a lot in terms of penetration which has improved big time after opening up of the sector. The biggest player LIC has also done a good job. The market is now turning on the quality side. There is more customer-centric pricing. The regulator is also making interventions. We fit in well as we are also focused on quality growth and improving the quality of insurance products.
Q Was Edelweiss was the first and the last candidate you courted?
A: We had over 300 candidates and finally we were able to find the best partner. We looked at banks as well, but the core decision of the management was that we need our own agency force. We need a partner which will concentrate on setting up its own agency force. There was a commitment for 10 years. Tough criteria - like the (substantial) capital required to set up an agency force without an IPO in the next 10 years - weeded out most of the candidates. In 2008, we were able to meet the Edelweiss management. We did two years of business planning with Edelweiss rather than negotiating on complicated legal issues of a joint venture. We did joint studies together. That has helped us a lot in firming up our plans. It's truly a joint venture where both partners have spent quality time before signing the JV papers.