Since then the tribe of life insurers has grown from 12 to 16, but ICICI still leads the private sector pack. With a portfolio of over 6.5 million policies, India's biggest private sector life insurer has not merely held on to its share but grown it; at the end of January 2008, the firm commanded 29 per cent of the share owned by private sector players. Quite some way below was Bajaj Allianz with 21 per cent, while State Bank of India [Get Quote] came in third with 10 per cent.

How did ICICI achieve that? Says Ashvin Parekh, national leader, financial services, Ernst & Young, "Their strategy has been to grow the portfolio large enough so that there is an in-built hedge and in a market where the portfolio has a larger element of savings rather than protection, this works well. And to make sure they can grow the business, they have built a distribution network." But that's only part of the story. Here is the rest.

Hitting it off with Ulips

ICICI Prudential's premium income grew at about 100 per cent between March 2003 and March 2007. Interestingly enough, the insurer started out with the traditional endowment products and was not the first to introduce the more popular Unit Linked Insurance Policy(Ulip): the credit for that goes to Birla Sunlife.

However, in the first full year of operations itself, it started offering Ulip policies and was selling more policies than anyone else. Today, Birla Sunlife doesn't find a place in the top five and players such as HDFC [Get Quote] Standard Life, which were late to cotton on to Ulips, may be regretting it.

Says Shikha Sharma, managing director, ICICI Prudential, "Ulips allowed the customer to engage with the product unlike in the case of endowment products where there was little transparency. Also, customers were unhappy with endowment products because it meant the money was locked in for a long time."

Sharma believes the systematic investment that Ulips allow made it easier to attract customers. Besides, the flexibility of the product, which allows customers to pay varying amounts depending on the stage of life that they're in, helped bring in the premiums.

Of course, the booming (until now) stock markets have played their part in making Ulips a hit; they now account for 90 per cent of the fast-growing market. The total new business premium written by life insurers in FY07 was Rs 75,300 crore (Rs 753 billion) and is expected to grow by about 40 per cent in FY08.

Playing the price card

It wasn't just that ICICI Prudential rolled out Ulips quickly; the company also made sure the products were priced competitively. Compared with the competition, ICICI's upfront charges have always been lower, says N S Kannan, executive director.

"We didn't believe it would be advisable to start out with a high upfront charge because India is a cost-conscious market. We have always been at the lower end of the spectrum - where competitors charged 50-60 per cent of the first year premium, we have charged 18-20 per cent," he explains.

With charges across the industry now converging at around 20 per cent of first year premiums, ICICI has come up with a zero-load product. Says Sharma, "Product innovation is a focus area for us, we need to stay relevant to the consumer."

Another scheme that has been introduced automatically balances the debt and equity components of the portfolio every quarter. Apart from this, ICICI Prudential has been quick off the block with retirement solutions and the first to come up with health products.

Says Sanjay Aggarwal, national industry director, financial services, KPMG, "Any player that has a good grip on customer segmentation, whether it is by demographics, class or by geographies, and caters to the various needs of policyholders should succeed."

Don't worry, be happy

Indeed, while most of the industry believed at one time that insurance would sell if it was made available, ICICI Prudential decided that like any other consumer product, insurance policies, too, needed to be pushed.

Sharma recalls how, when the marketing team was thinking up an advertising campaign, almost everyone, including the company's board, pooh-poohed the idea.

"A lot of people thought we were wasting money and as a result we built our brand in a vacuum," she says. From the very start, ICICI discarded the "fear" platform typically used for hawking insurance, choosing instead a "happy" platform to convey a more positive message.

Of course, the insurer was fortunate to have the strength of the ICICI Bank brand behind it; that went a long way in instilling confidence in customers that the brand was trustworthy - a very important attribute in insurance - and would be there for the long-term. But, as industry watchers point out, other incumbents too were backed by strong brands, HDFC, SBI and Tata, to name a few.

Catch them young

Even today after it has rolled out so many campaigns, ICICI remains among the top advertisers: ad spends, as a percentage of new business premium, range between 0.5 per cent and 0.75 per cent.

But from here on, it will be more of sustenance advertising, says Kannan, who expects percentage spends to come off as the business scales up.

In the more recent campaigns, such as the "Jeetey raho" one, the pitch has changed somewhat, becoming more rational rather than emotive mainly because the category today is no longer new. The idea now, explains Sharma, is to encourage long-term financial planning with protection. "And so we focus more on spelling out the features and benefits," she adds.

Interestingly, even though the target customer is actually a person in the middle- to high-income group and in the 35-45 age bracket, the insurer's advertising campaigns target the 30- to 40-year age group.

"People like to feel they're young," jokes Sharma, adding that the average age of ICICI Prudential's policyholders is about eight years lower than those of LIC [Get Quote]. The idea of reaching out to people in that age group is that insurance is a long-term product with maturities of 15 and 20 years.

Feet on the street

If ICICI Prudential has managed to sign on 6.5 million policy holders, it is because the company has built up a strong agent network, who bring in 60 per cent of the total premium. Today the insurer has nearly 250,000 agents working for it, even though it doesn't hand out the best commissions in the industry.

Bajaj Allianz's network is about 275,000- strong, while the public sector Life Insurance Corporation boasts over a million agents. Says Sharma, "Our commissions are at the lower end compared with peers but we are trying to compensate them by ensuring that they do better volumes."

The insurer is also rolling out offices at a furious pace; by the end of March 2008, ICICI Prudential will have around 1,500 offices from around 1,100 currently, of which nearly 900 will have come up in 2007-08. Bajaj Allianz, too, has around 1,000 offices as of now. "We may slow down the pace somewhat but we should have in excess of 3,500 branches in five years, " says Kannan.

Of parents and partners

The industry believes ICICI Prudential has a big advantage in that it can leverage the customer base of its parent ICICI Bank. Says a competitor, "ICICI Bank is the largest private sector bank in the country and they have strong relationships with customers."

Bajaj Allianz, for instance, didn't have that advantage. Bancassurance today fetches about 27 per cent of ICICI's premium; apart from ICICI Bank, the insurer sells through Bank of India, Federal Bank [Get Quote], South Indian Bank [Get Quote] and some co-operative and rural banks.

According to Saurabh Tripathi, partner and director, The Boston Consulting Group, it is distribution that is the key to getting volumes across the spectrum of retail products. Says he, "Companies that have focused on distribution have been the winners because product differentiation is difficult in a market where it is easy to copy."

If ICICI's parent has played a key role in its success, so has its partner. Says KPMG's Aggarwal, "There aren't too many joint ventures that work well but in this instance, each of the partners appears to have managed to leverage the strength of the other and work as a team."

Adds Seshadri Sen, strategist at Macquarie Securities, "Prudential has built up a successful business in Asia and is committed to India. Moreover, ICICI is aggressive, so the marriage has worked well." ICICI, for instance, has drawn on Prudential's experience in the area of products and actuarial knowledge.

Future policy

While ICICI Prudential has done well to stay at the top, the next seven years will certainly be more difficult than the last seven.

Competition is getting more keen - in the past couple of years, Bajaj Allianz is believed to have written more policies than Prudential. SBI Life has a stronger distribution now that it has signed on many more agents and newcomers like Reliance [Get Quote] (which took over AMP Sanmar) are growing at a fast pace. But the strong growth in the industry has surprised everyone.

Says Sharma, "We didn't expect to grow 100 per cent in 2006-07 and at over 50 per cent on that base in the current year."

In fact, that's one reason why the insurer has chosen to invest in the future and postpone profits. The 900-odd offices will cost the company approximately Rs 300 crore (Rs 3 billion) and Sharma says that could push the break-even beyond the 2009-10 time frame planned earlier; the accounting profit net of expenses is now expected sometime in 2011-12. That may mean some pain in the near term but it could turn out to be the best policy that ICICI Prudential wrote.