Interview / Deepak Satwalekar

'We'll help NRIs to gift insurance policies to their kith and kin in India'

Part I: 'Housing finance. Life insurance. It's a perfect fit.'

Part II: 'LIC is the only real competitor we face'

Would you be targeting the existing customers of HDFC and HDFC Bank?

Absolutely. Besides our agents, we will be distributing our products through HDFC and HDFC Bank. Two public sector banks with huge networks have come to us saying they want to enter into a strategic tie-up with us for distributing our products. A few private sector banks have also been in touch with us.

HDFC has got 800,000 borrowers and 1.1 million depositors. HDFC Bank has 1.5 million customers. That's the readymade database we've got. So we'll be exploiting that database.

That sounds impressive. The plan might look good on paper. But will it really work? Has HDFC Bank been able to leverage the customer base of parent HDFC for its own advantage?

That is what we have started right now. It's an exchange programme that we've started where HDFC is selling the savings accounts and demat accounts and the bank is selling housing loans. We are doing very well. It's been launched a month ago here and is doing very well just now.

It's not easy. What you are saying is right. BancAssurance as a concept has worked well only in Europe and that too largely in France. (Bancassurance model: The concept is that the sale of insurance and investments products by banks should be a fully integrated addition to the core banking product line.)

But if you can motivate these people and if you have specific people assigned to the task, it can happen. If you have the same person who is to make the housing loan and also sell insurance and sell a mutual fund and sell a demat account, it's not going to happen. You've to have people specifically assigned for this.

HDFC makes the strategy go forward. It will become a distribution powerhouse.

Egos, culture clashes, etc, are said to kill joint ventures. What are the shock-absorbers in your company?

We've four-and-a-half years of living together before this happened. So if there was any reason for it not to have worked, it should have surfaced by now. We have seen all the warts and everything for each other.

You mean, after four-and-a-half years of a live-in arrangement, you are now heading towards matrimony, so to say?

Yeah. (Laughs)Come on, don't make it sound so bad.

I don't see a problem with this venture because I think, when you look at it... you mentioned about the egos.... I've seen Standard Life at various levels. The value systems that they have are so similar to our value systems, there is no reason to believe that this (joint venture) will fail.

Is this because Standard Life is a British company? There is a view that joint ventures involving Indian and American companies face a lot of problems.

Standard Life will tell you they are a Scottish company, not English. Well, that's a view. We are rather fortunate with the US partners that we have (GE Capital). I think their mindset is fine.

You have to be clear of what you expect from the relationship, any relationship. If you are clear about what you expect, it's not going to disappoint you. It's only when you are not clear is when you run into problems.

Do you have any plans of taking the joint venture to the capital markets in the medium term?

Sure. But not right now. It will have to be a profit-making company before we go to the capital markets. So it may be sometime before we do that. Let's say between five and ten years from now.

In any case, the way the Act is structured, we are required to go the capital markets in ten years' time.

Do you have any plans to leverage the growing Internet penetration levels in India?

We will be launching our Web site. When I say we will distribute our products, I mean that they will be distributed through agents, or directly through direct-mail, tele-calling or the Internet; they will be distributed through the Bancassurance model via HDFC, HDFC Bank and other banks. Every medium for distribution will be used.

Personally, I don't think that we will sell a lot on the Internet. If you were to look at the US market, it has some of the most sophisticated users of the Internet. I believe less than 2 per cent of the policies are sold on the Net. By and large, these are non-life... auto policies.

So, life policies... what's going to happen is that it will be used as a comparison media. People will learn to understand what the product is, what the comparison is, what the product pricing is, what the servicing is, all of that will happen.

The actual bank -- they would still need to talk to someone. And that is something that they are used to, because today we are dealing in housing finance; housing is a product that for most people is the single biggest investment they will ever make in their lives. So they come and talk to us.

If you want, you have a Web site for that also. We've got all our literature which is really based on feedback from our customers -- what are in modern terms called FAQs. They will read all of that but they still want to come and hear it from you, because it's a big investment, an investment in which the family is involved.

It's not like buying a TV . Fine, if there's a fault, what will happen is, they will take it away and I can't see Amitabh Bachchan, that's all. But I'm not out of my house. We understand people making family decisions. Housing. Insurance. They are similar.

We are hoping to target the Indian diaspora too as soon as we establish and settle down here. We have an office in Dubai. We've got service associates in three other Gulf countries. One of them has already come and talked to us saying that they want to have the distribution rights for the Middle East.

If NRIs want to gift insurance policies to their kith and kin, we will help them do that. We will not discriminate on where the money comes from as long as it doesn't come from Columbia which is the drug money. We will even arrange for their payments to come through HDFC Bank. So if you want to use their cards, the payment gateway is there so that this makes it easy and painless for you.

What is your advertising budget like?

The numbers are being worked out right now. What we are working out is the total cost that the products can support. The strategy for advertising and marketing is being finalised. Largely it will be the print medium, not the television, because it is scattered at this point in time.

Initially, there might be a multi-media burst so that people know we are in business. As for the ad budget, it would be extremely conservative. We would like the brand to do the talking.

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