Yashish Dahiya, Chairman & CEO, PB Fintech, says “we have enough data, which implies that we believe that we can deserve a better pricing than exists in the market today. And for that, we would like to become a reinsurance broker. That is the end of it. What we eventually want to be is a reinsurance broker. Now for that, for a while we have to be a reinsurance carrier. Now that is not a board decided thing, I am just speaking plainly. Our intention is not to become a reinsurer and become a very capital intensive business where we invest a lot of capital. Our intent is to be an enabler, data provider, tech provider and be the process provider and process definer.”
When we spoke last, your guidance was Rs 1,000 crore of PAT by FY27. But between that and now, the world has changed, business has become better, competition has got diluted and interest from the stock market has made a roaring comeback. Can I say that it is time for you to revisit your guidance and perhaps change FY27 to FY26?
My guidance has not changed, it had not changed then, it has not changed now. If you had asked me on the day of IPO, it was the same guidance and even today it is the same guidance and I do not think anything has changed in our company. This year we might be performing a little better than expected, but that is not anything significant right. It is just maybe 5-10% better than expected.
Unlock Leadership Excellence with a Range of CXO Courses
Offering CollegeCourseWebsiteIndian School of BusinessISB Chief Technology OfficerVisitIndian School of BusinessISB Chief Digital OfficerVisitIIM LucknowIIML Chief Marketing Officer ProgrammeVisit
So, our guidance stays the same. This year we will broadly be a PAT positive and every year in our core business we add about Rs 200 crore of incremental profit and this comes from both PolicyBazaar and Paisabazaar together and so over three years between FY24 and FY27, we would add about Rs 600 crore of positivity and there is some positive upside here possible because in the later years the renewals become a very large chunk.
The second part is even this year, we will be spending about Rs 170 crore on new initiatives as a loss and we expect by FY27 to make that zero. So, you should see a delta of about Rs 760 crore from this. And the last part is that while this year our adjusted EBITDA and our PAT numbers are going to be very similar, by FY27, our PAT will actually be Rs 250 crore more than our adjusted EBITDA simply because of the differential between interest income and ESOP charges. Our ESOP charges this year are Rs 350 crore. Last year, it was Rs 650 crore but by FY27, it will be less than Rs 100 crores. So one can see a Rs 250 crore delta right there, plus our cash reserves are growing. Even this year, we are adding about Rs 400 crore of cash. We have the same amount of cash as we had on the day of the IPO. So, nothing has changed. It is just what we said just turning out to be real that is all.
What has changed from a market curiosity standpoint is the birth of Jio Services and the fact that they are looking at scaling it up. They are looking at a lot of tie-ups at least on the distribution side and they have started with BlackRock. We understand that they could be changing the way the insurance distribution is done. Is that a welcome competition or something which you need to be cognisant of?
Everything is a welcome competition. Please appreciate what we do is very specific. 86% of the value –the way I calculate the value which is the NPV of the company– comes from two single products which are basically protection, health insurance and term insurance.
For us, those are extremely critical and those products whoever has to do them whether it is X, Y, Z has to do it with a lot of passion, a lot of effort and it will not happen easily because customers do not stand in a queue to buy these products.
Usually what you need is a lot of convincing people and a lot of hand-holding during the claims process because these are mostly painful products. In both you pay money to never see that money again and hope you never interact with the product ever because either you would have to die or be in a hospital to interact with that product. It is not a happy experience. It is a very sad experience. Not many brands would like to get involved in that and it is not a very profitable business at the end of it.
Please let us appreciate a very simple thing. People get carried away when you sell term insurance of Rs 1 crore. You make about Rs 4,500 as a distributor, as marketer, whatever. When you sell a Rs 3,00,000 loan, you make Rs 9000. Now which is easier – selling a one crore rupee term insurance or selling a Rs 3 lakh loan? When you sell a credit card, you make Rs 2,500. I am just trying to explain to you. People think insurance is very profitable. It is not necessarily so. You can do much better in lending. So, unless you have a deep passion, this is not a business worth going to. It is not a business which is going to take anybody to Mars or whatever.
Everyone in the market is now talking about Bima Sugam and how this could really be a UPI moment for the insurance sector. How would life change for you?
See, we get put in a very uncomfortable spot here and I will explain why. See, it is a regulator sponsored project and we are a regulated entity. For us to have anything but a positive comment on it is sort of suicide. I think it is very difficult. But I will still take a stab at it. See, UPI was a great platform which enabled payments across banks, across people and that has helped a lot. But at the end of it, it still took a Paytm, a PhonePe and a Google Pay to make UPI very popular and in the same breath what I would say or suggest is that as long as the platform stayed a service platform, what are the biggest issues our customers face today? Claims not getting settled or pain in customer servicing.
If that part is what is focussed on, it would be fantastic. If sales is focussed on, I think we already have three million agents and banks and insurance companies and people like us trying to sell. It is perfectly fine. But I do not know how efficient an effort it is to get into sales. Any form of differential licensing would be a very serious issue. Differential licensing means I can do X, but others cannot do it. That just means might as well not give others a license.
But I have said more than I usually say because I do recognise that we are a regulated entity and it is a very difficult position to be in and people should be fairly cognisant and respectful of our position as a regulated entity.
There is one clarity which perhaps everybody wants to understand: When will the entire ESOP charge finish completely and in talent hiring sequence, what kind of future ESOP policy are you likely to follow?
We have already indicated that, in fact, yesterday or day before we had our board meeting and what we have done is we have moved all our future ESOPs to market-linked ESOPs rather than discounted price ESOPs. So that tells you how we think about the future. We will not have ESOPs which are given out at Rs 2 or Rs 10 or whatever. They will actually be at market price and management will be rewarded for taking the price upwards from then onwards.
What happened in the past and what was rewarded in the past is a thing of the past and will over time keep coming down. We started off with roughly Rs 600-700 crore yearly cost. It will settle down at about Rs 100-150 crore. It will come down to about Rs 100 crore to begin with and then our management cost from an ongoing basis should be about 100 to 150 crores per year.
In retail, there is an omni-channel model which has both online and offline presence. In insurance, what is a good model? Will it be digital service by a physical model or your distribution model will be where you need on-feed agents serviced by a physical infrastructure?
In insurance, there are a lot of struggle points. The struggle points are at the point of claims and at the point of customer servicing. When the person buys a policy, how quickly can he cancel it? How quickly can he get his refunds? When the policy ends, how quickly does he get the money? How effortlessly does he get the money? How easily is the claim process managed?
We are hearing a lot of noise around the claims experience of consumers, right? Now, those things impact the confidence of consumers and thus the consumer says, okay, who do I trust in this whole situation? And I think for that, to some extent, physical presence becomes helpful which is why we have deployed it in more than 150 cities now. So it is an interesting place but the problem we really need to solve is that, in the last 15 years, whenever we have had a chance and every insurance company knows it – they have two products. One is a zero commission product and one is a commissionable product. We have always preferred the zero commission product. It is without exception because in insurance you do not make money just for commission. There is marketing, there is outsourcing, there are many ways in which you make money, there are consulting services, there are many ways in which you make money. Commission is just one of those ways. And even zero commission products have charges, whether it is a marketing cost, whether it is call centre cost.
So all I am saying is insurance has not reached a stage where people are lining up to buy it and just need an app where they can interact with it. Thus the physical support and the physical push is still required and whether it is through a contact centre, a video call or whichever mechanism.
It is not just to sell, it is also to impart confidence that at the point of claim. Increasingly I hear from consumers that when you buy it from Policy Bazaar, you are likely to have a better claims experience because they are getting involved in the claims experience and they are there at the point of claim. I think that is what is required. At the end of it, automation will become a reality, but before automation happens, operational support is required.
The buzz is PB Finetch is moving into manufacturing space. You have gone to the exchanges and denied it. So is it that you will not move into manufacturing at all?
I think manufacturing needs to be defined very clearly for us to answer that question very clearly. And I do not have any difficulty answering any question whatsoever. We are not shy of answering anything unless it is misunderstood by people. We are crystal clear, we do not want to become an insurance company which means we have 50-60 insurance companies in the market. Most of them are our partners.
We do not want to become a competitor as that is not our intention, not today, not ever. What we want to do is enable as many of our partners as we can, as a distributor, as a product data provider, as a product initiator. We have a lot of product ideas. We want to help in that. And we believe some of our partners face difficulty in terms of reinsurance pricing and thus we want to also assist them on the reinsurance pricing side. We have enough data, which implies that we believe that we can deserve a better pricing than exists in the market today. And for that, we would like to become a reinsurance broker. That is actually the end of it. What we eventually want to be is a reinsurance broker. Now for that, for a while we have to be a reinsurance carrier. Now that is not a board decided thing, I am just speaking plainly.
At this point, we have not even gone to the board. And we may have to show a bit of capital in that. However, our intention is not to become a reinsurer and become a very capital intensive business where we invest a lot of capital. Our intent is to be an enabler, be the data provider, be the tech provider, be the process provider, be the process definer, be all of those things, but not be a competitor, but be a supporter to all our partners and allow better and better products and better and better underwriting to happen in the market.
I think the intent is crystal clear, to be a broker, the broker is just a word, right. It is an enabler, whether it is at a distribution end, whether it is at a reinsurance end but essentially be an enabler. And for that enablement, if we have to deploy some capital, we are very happy to do so. We have capital at the end of it, but the idea is not to become a capital intensive business.
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : The Economic Times of India – https://economictimes.indiatimes.com/markets/expert-view/we-eventually-want-to-become-a-reinsurance-broker-yashish-dahiya-pb-infotech/articleshow/103925028.cms
