Will Sandeep Bakhshi do a PruLife at ICICI Bank?4 min read . Updated: 20 Jun 2018, 02:58 PM IST
Sandeep Bakhshi is uniquely poised to make deep changes in the way banks sell insurance policies and mutual funds
Soft spoken and unhurried, Sandeep Bakhshi is probably the best placed today to calm the turbulent waters at ICICI Bank Ltd. More Warren Buffett than The Wolf of Wall Street, Bakhshi is a career banker who has now successfully run the insurance piece of the financial services empire of the ICICI Group of companies. He’s done this before—come into a bad situation and turned it around. Bakhshi was brought in to lead ICICI Prudential Life in 2010 at a difficult time. He inherited an aggressive sales-at-any-cost culture set in place by the firm’s first chief executive, Shikha Sharma. ICICI Prudential Life had been infamously in trouble over its “Operation Jehad" in 2005, when one of the branches used the name and images of Osama Bin Laden to motivate the sales force. Insurance policy sales were “kills", and five ICICI Prudential Life employees were jailed over this episode. You can read more about this here.
Remember that 2004 to 2010 were the years of a young, newly privatised life insurance industry that walked into a bull run with a new market-linked product called Unit Linked Insurance Plans (Ulips). Frauds, misselling and investor distress were so high that by 2010, the government leaned on the insurance regulator to put in place some safeguards. Ulip rules changed for the better in September 2010, with a better cost and incentive structure. Bakhshi took over on 31 July 2010.
There was flux outside and inside. The firm itself was in a flux, having lost the second CEO in just over a year. V. Vaidyanathan had taken over as managing director and CEO in April 2009 as Sharma moved out to join Axis Bank. But just a year later, Bakhshi was brought in to replace Vaidyanathan, who was moving on to another assignment.
Bundled life insurance is a tough business and has been made tougher with the kind of agency distribution model used by the erstwhile monopoly Life Insurance Corporation of India (LIC). Bakhshi’s challenges were to build profitability for the firm while dealing with the huge crisis of confidence among investors. He realized early on that one could not come at the cost of the other. Unless the customer comes and stays with the product, the firm cannot see sustainable profits.
One way to judge Bakhshi in his role at ICICI Prudential Life is to look at the persistency number. A 61st month persistency shows percentage of policies alive five years after a sale. A 61st month persistency of 80% shows that 80 out of 100 polices sold five year ago are still being funded by investors. Remember that life insurance is a long-term business with average product tenure of 15-20 years. By 2013-14, the 61st month persistency of the company was down to 10.7%. This means that just 10 policies out of 100 sold five years ago (2008-09) were still being serviced. The rest had lapsed. Low persistency rates point to misselling and fraudulent sales. A persistency number of 10% reflects poorly on the sales culture of the firm in those years. By 2016-17, this number was up at 49.12%, ahead of a 44% persistency of LIC.
The use of technology, focus on Ulips (the new improved Ulip is a better deal than the money-back) and pure term plans, and processes put in place to double check the sales process are some of the measures Bakhshi took in his eight-year tenure at the firm. Bakhshi was also at the helm of making ICICI Prudential the first life insurance firm to list.
Happier switching to Hindi to explain a point, Bakhshi is known to be a consensus builder but with a tight focus on what he wants as an outcome. The skill-set of an in-house turnarounder will come in handy as it is unlikely that Chanda Kochhar will be returning to the job. Bakhshi would not leave the top job for a number two post. The life insurance firm already has a new CEO and Kochhar has just a few months of tenure left.
Bakhshi is uniquely poised to make deep changes in the way banks sell insurance policies and mutual funds. He has seen from an outsider’s point of view the distress caused by unregulated sales by bank managers. As head of India’s second largest bank, Bakhshi will have an opportunity to build a sales culture in banking as he has attempted to do in the life insurance firm. Remains to be seen if he will.
Monika Halan is consulting editor at Mint and writes on household finance, policy and regulation. Her Twitter handle is @monikahalan. To read more columns by her, click here