Never waste a crisis: CEO of Tokio Marine Holdings

Shuzo Sumi, CEO of Tokio Marine Holdings

A fitness enthusiast, Shuzo Sumi, in his younger days, triedhis hand at rowing and rugby. The President and CEO of leading Japaneseinsurance firm, Tokio Marine Holdings, still climbs 280 steps every morning toreach his office. On a visit to Mumbai to sign a joint venture lead withdomestic brokerage firm Edelweiss Capital to start a life insurance company inIndia, he spoke to Anand Adhikari.     

Q Why did it take Tokio Marine almost a decade to enter lifeinsurance in India? You entered general insurance opportunity quite early soonafter the insurance sector was opened to foreign players in 2000?

A: We actually took a decision to enter India some six yearsago. India is undoubtedly a very attractive market for life insurance business.There is a huge population and the penetration levels are also very low ascompared to other countries. We have been studying the Indian market for thelast few years. The most important factor for success in any joint venturebusiness is to have the right partner. So we actually took a very long time tofind Edelweiss Capital as a partner. Under the Japanese regulations until 1995,we were solely a general insurance company. But when the life insuranceregulations were revised to allow more players for healthy competition, TokioMarine also applied for a life insurance licence. We have a 15-year-old historyin the life insurance market in Japan. We are also the largest player amongst the lot that started after the liberalisationof the sector.   

Q Is the timing right? The global environment now is one ofgloom and doom. India also has its own governance issues and there areregulatory 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 forthe last two to three years. I'm worried though about the current situation inEurope because of the Greek crisis and the US downgrade by a rating agency. Thesituation of Europe and the US will surely impact Asia. We are very concernedabout 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 tostart setting up infrastructure when the economy is not good. You should neverwaste a crisis. You always end up acquiring the right habits.

Q We already have more than three dozen private sector lifeinsurance players in India with global partners. Is there space for more?

A: China has 63 players today. By 2050, India is expected toovertake China in terms of the insurance market size. In China, you arerequired to take permission from every province to set up operations. Thepopular product is unit linked insurance plans (ULIPS) and the bancasurancechannel of distribution is also very popular. We ranked No. 8 out of the 63 players in China. We are one of thefastest growing companies in China.  InIndia, the low penetration level shows a big potential.  Our first priority will be to strengthen ourown platform and establish our branch network. As per our business plan, weplan to break even in the sixth year. Insurance is actually a capital intensive business where you can makeprofits earlier if you stop growing.

Q You have a non-bank partner IFFCO in your generalinsurance joint venture. You are now joining hands with another non-bankpartner 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 partnerhas the same chemistry or whether both share the same management philosophy andsame vision. That's what matters for us. Take for example: we are very clear that the agency channel is a keychallenge for us in India.  This is ourexperience in various countries where we do business.  If you want to be successful in lifeinsurance, you need an agency network of your own.  The insurance business requires servicesafter one sells a policy, and the agency network complements that verywell. 

Q What is your reading of the Indian insurance industrywhich is struggling to make profits even in its 10th year?

A: I think there was a rapid growth at the start. Thecompanies witnessed high growth in the initial years. The private sector alsocontributed a lot in terms of penetration which has improved big time afteropening up of the sector. The biggest player LIC has also done a good job. Themarket is now turning on the quality side. There is more customer-centric pricing. The regulator is also makinginterventions.  We fit in well as we arealso focused on quality growth and improving the quality of insurance products.

Q Was Edelweiss was the first and the last candidate youcourted?

A: We had over 300 candidates and finally we were able tofind the best partner. We looked at banks as well, but the core decision of themanagement was that we need our own agency force. We need a partner which willconcentrate 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 theEdelweiss management. We did two years of business planning with Edelweissrather than negotiating on complicated legal issues of a joint venture. We didjoint studies together. That has helped us a lot in firming up our plans. It'struly a joint venture where both partners have spent quality time beforesigning the JV papers.