A country where insurance products are often forced upon customers like FMCG products, an economy were more than 9000 people died in April 2015 earthquake; the same country where landslides and floods have simply been just another regular events during monsoon; the same country whose citizens take insurance as just another form of investment with minimal return or say the country where insurance agents are perceived as agents motivated by commission; the team of Mr. Pravin Raman Parajuli at Reliance Life Insurance is on a journey to redefine insurance industry in Nepal.
Interviewer : Rachit Agrawal, Dheerusha Tiwari and Krishna Khatiwada
Interviewee : Mr. Pravin Raman Parajuli; CEO of Reliance Life Insurance
Interview location : Reliance Life Insurance; New Baneshwor
Brought into words by : Dheerusha Tiwari
Duration : 10 minutes read with 13 questions
A post graduate alumni of Kathmandu University School of Management; Pravin Raman Parajuli undertook his first job at NMB Bank Limited for six years. Continuing the trend of joining banking sector, Mr. Parajuli then joined NABIL Bank Limited. His contribution in the treasury department during the initial days at NABIL handed him with an opportunity to contribute even in merchant banking sector. When the central bank introduced the rule to segregate merchant banking service from commercial banks, NABIL Investment came into existence as an independent subsidiary. Mr. Parajuli undertook the responsibility of NABIL Investment as a CEO and worked on amendment and introduction of articles, policies, programs and products. Parajuli’s ability to distinguish NABIL Investment from the mainstream merchant banking companies has taken NABIL Investment to a notable height today. In the banking industry, Mr. Parajuli is regarded as a person who does not limit himself within the single company but rather works for the betterment of the overall industry. His contributions in the overall merchant banking sector got him appointed as the President of Nepal Merchant Bankers’ Association. During his presidency, his team was able to successfully crystalize the status of merchant bank association with SEBON. Today, expectations have been held high as Mr. Parajuli stepped into insurance industry on Poush, 2074 through Reliance Life in order to mark his involvement in this sector.
The paragraphs ahead are the aspirations that Mr. Pravin Raman Parajuli has taken along with Reliance Life Insurance for a better insurance experience in Nepal:
What was the motive behind establishing Reliance Life when there were already established insurance companies in Nepal?
“Reliance will not remain as another insurance entity. It is here to remain as a brand.”
A group of promoters such as Siddhartha Bank Limited; an institutional representation and other renowned business houses in Nepal came together with an objective of establishing an insurance company that implies the “going concern” principle. They aimed for a long term vision. In line with Board’s vision, the management team at Reliance comes together with a clear vision on how to differentiate itself from competitors in terms of quality of service delivery, human resources, innovative products etc. We are here to meet the expectations of shareholders, promoters and management and establish a brand for Reliance.
How has the company differentiated in terms of products since its short span of establishment?
“The existing products are differentiated in one way or other by having a thorough research of the market.”
The product development team at Reliance has done adequate research to identify the opportunities lying in introduction of innovative products in insurance industry. The major drawback of the insurance industry is that Nepalese insurance companies use a push strategy (where products are taken directly to the customers). We, at Reliance consider the need of the customer first and then come up with the products as per their requirement. Now, let me point out some of the major differentiations in our products.
When it comes to a child plan, we understand, you care for your child no matter what age he/she is in. Unlike the mainstream child insurance policy in Nepal, where coverage is generally provided to the bread-earner only after the child reaches six years or more, Reliance commits to provide the insurance from the completion of the child’s first month on earth. In a culturally sophisticated country like Nepal, we understand the bond between a newly born child and parents. That is why Reliance has a dual coverage system. Meaning, in case of eventuality, the sum assured is given followed by continuity of policy till its tenure wherein the child again gets the sum assured plus applicable bonus. In addition, it has additional coverage embedded in the policy itself like ADB - Accident Death Benefit, MIB- Monthly Income Benefit, PWB – Premium Waiver Benefit etc., the features which ensures the dependent i.e. child has continuity of certain standard of living & education as earlier even in case of eventuality of the guardian.
Is such differentiation only for child policy or any other policies?
“We provide Critical Illness coverage for a maximum upto NPR 50 lakhs or sum assured, whichever is lower for 7, 11 and 18 diseases, the only Company in Nepal doing so, because we care!”
There are certain differentiations in every other policies. Now, let me take an example of critical illness policy. Usually, in health policies, the diseases are categorized into groups such as 7, 11 and 18 and a number of diseases are listed under these groups. We understand the importance of health. So, if the insured is diagnosed with any of these diseases of its assured category, then a lump sum amount to a maximum upto NPR 50 lakhs or sum assured, whichever is lower will be given.
Further, we are also trying to ensure that required coverage is given through term insurance plans wherein the customer can be covered to the extent required with nominal insurance cost which generally is not the case for endowment nature of plans. We have identified the gaps in the market and fulfilled those in our products that has been launched.
Whom does the company think of as competition today? Have you done any kind of competitive mapping as of now?
“For Reliance, there is a professional competition with all licensed insurance companies.”
In the initial phase, it is likely that we will compare ourselves with new ones in context of indicators. But we are not limiting our comparison with just the newly issued companies. Last year was simply a preparatory work for Reliance. This fiscal year all the stakeholders will feel our differentiation in the market. Over time, we will be differentiating ourselves from both old and new companies.
In context of competitive mapping, the old companies initially might have strength at multiple fronts but they do have their limitations too. As a new company, we can maximize our strength by building upon the weaknesses of old companies. So, we will learn from their strength, but build upon their weakness on our own terms and conditions. Moreover, our focus is to establish Reliance as a differentiating brand in the industry.
As of third quarter of last fiscal year, Reliance had insurance policies of only 570 (least among newly established insurance companies) but its net profit was around Rs 10.6 crore (third among new insurance companies)? The major contribution of net profit was investment rather than premium. So, what medium/sectors have you chosen for investment? Does the company have its investment in stock market?
“Well, numbers might be deceiving but quality won’t. Reliance plans to maximize the value of investment rather than simply investing.”
I believe, number of insurance policies can be deceiving at times in the financial statements. If you go minutely in the nature of insurance products, you will find a policy termed “foreign employment insurance”. In this policy, ticket sizes are small and it is also a mandatory requirement for workers flying abroad. At Reliance, we have our own terms and conditions for issuance of such policy remaining within certain regulatory norms which generally differentiates from competitors. We want to prioritize quality of policy rather than numbers.
When it comes to investment, we have been following the framework of investment set by Insurance Board. We have tried to maximize the returns on investment ensuring safety of principal which has resulted in good bottom-line numbers. We do have certain exposure in capital market too.
What kind of performance can we expect from Reliance last quarter?
“Last year was just a preparatory work. This year, Reliance will grow.”
In terms of first year premium, we will most likely close at NPR 8.5 Crores in 8 months of operation. As I said earlier, last year was preparatory year for us. In this year, the required percentage of growth can be expected from Reliance by stakeholders.
How much of bonus can insured clients expect from the organization?
“A decent bonus for the insured clients is expected post actuarial valuations.”
Our product has been launched recently. The bonus rate is affected by multiple factors such as actuarial evaluation, loading of management expenses etc. Even in the initial phase, we expect it to be a decent once in line with market as our investment returns has been good.
When are you thinking of going to public? The AGM has been conducted so, how far have the preparations been made?
“Our target is within this fiscal year.”
In order to go public, we are undertaking all the preparatory works like appointing issue manager. We still need to seek approval from Beema Samiti. We are also supposed to present the last fiscal year’s performance to SEBON. At the earliest possible, we have targeted this year subject to regulatory approvals as envisaged.
Who are your targeted clients? Are you planning to operate in rural areas?
“Our target clients are segregated in three divisions -urban, semi-urban and rural areas.”
Insurance business is based on networks. Our clients have been divided into urban, semi-urban and rural areas. There are challenges and opportunities in each of the segment. The majority of prospective insurance clients lie in urban and semi urban areas. However, we have been penetrating rural areas too which is evident from our point of sales representation as well.
How far have you progressed with your networks?
“We have standardized branches throughout the nation and rigorous agency training.”
Our company initiated its commercial operation on 1st Mangsir, 2074. I joined the company on 13th Poush, 2074. In 7 months of my date of joining, we have progressed in terms of product line and standardized branches. When I say standardized branches, it refers to consistency among any branches within the country. A visitor will find no significant difference among these branches in terms of interior design (furniture), quality, service and products. These standardized branches deliver a message to our clients that we hold a long term vision and we want to establish ourselves as a brand targeting good quality service delivery at earliest possible. By the end of Shrawan, we will have 49 branches.
Life Insurance is an agent based business. 90 to 95% of the business is done through agencies. So, we have focused on the same. In addition, we also intend to have significant contribution from bancassurance & corporate channels. Thus, we have given due weightage to them as well. Besides, we also understand that right selling & insurance penetration will increase only if quality agents are produced which is a backbone for the company. Keeping this into consideration, our agents go through a rigorous and qualitative training. They are trained in a way where they can relate income and future needs of clients with affordability & nature of products to be catered.
How do you view the overall insurance industry of the country? Do you think making health insurance compulsory by government, like third-party insurance, is a good approach?
“A good initiation indeed.”
Nepal’s level of awareness regarding insurance is low. Even those who are aware are not insured. In such cases, I think we need national level awareness campaigns. If such awareness campaigns are pushed from policy level wherein regulator & stakeholders come together and contribute to enhance the penetration of insurance industry through national level awareness campaigns, awareness is bound to improve. In order to create awareness and ensure required coverage, compulsory requirements are also needed at times till the period the general masses are well aware of its importance and does it voluntarily.
Even an economy like India has a very few but fundamentally strong insurance companies, do you think Nepal requires 18 life insurance companies?
“I don’t think its number that matters, it’s the penetration that actually matters.”
What is the right number for this economy will always remain a debatable topic. If you ask me personally, I think, we should see the level of penetration rather than number of companies. If the market was saturated, a higher number of companies might not be essential. Suppose, if 5 companies were having a market penetration of 95%, maybe even 5 would be more then. Since more than 90% of the market is yet to be tapped, the number discussion remains insignificant. So, number is not the concern, penetration is.
During the Golden Jubilee of Beema Samiti, Finance Minister Dr. Khatiwada had directed to increase the insurance penetration from the current 10% to 25% within 4 years. How feasible do you find the claim?
“A good initiation to enhance market penetration by licensed institutions.”
Yes, it is possible. As per the media sources, we have already increased market penetration by additional 4% than a year prior. Since both new and old companies have started to expand their geographical presence and are also doing aggressive marketing strategy, the shared number by Finance Minister is not a distant one. However, facilitation needs to be done at all levels to deliver the same.
Mr. Pravin Raman Parajuli with a diversified background in banking, merchant banking and insurance sector advises the youth of this generation to keep their career plan as simple as possible. He advises youth to keep a clear vision of what they want professionally. Further, he believes, it’s not only education that matters but it’s rather attitude that comes after education which really matters. The day you feel, you do not want to go to work, it’s time to leave the organization. Going with the tagline of Reliance- “Khulera jiau/Live Life”, he suggests, don’t simply keep on exploring institutions, but work in a good company & then learn to enjoy the same in order to grow. If you imply it, it’s always looking ahead.
We would like to express our gratitude to Mr. Pravin Raman Parajuli for his time to promote our understanding on how Reliance Life Insurance will redefine the Insurance in this untapped industry of Nepal.
Please note that the article has been published on the consent of the concerned personality. The interview video is an edited form of the original video.