'From returns to protection'

Written by Suneeti Ahuja | Updated: Sep 29 2008, 20:17pm hrs
The need of the hour is to change mindsets from investment returns to protection, said Kapil Mehta, chief executive officer and managing director, DLF Pramerica Life Insurance. In an interview with our correspondent, he also discussed the opportunities and challenges that await the insurance sectors 21st entrant.

You are the latest entrant in the life insurance space. What opportunities and challenges do you see in this market
We are the 21st player to enter this market. First, life insurance penetration in the country is at 4.8 per cent, which is pretty low compared with other countries. So there is huge opportunity even for new players. Second, if you ask a group of, say, 100 people, if they have life insurance cover, almost 60-70 will say yes. But ask a second question: in case something were to happen to them today, how many people have life insurance policies that will take care of their families for next 10 years or so Just two or three people will be confident. This has been seen across geographies. People are just not aware of how much life insurance they need.
As for the challenges, it is critical for companies like us that have entered late to come out with innovative products, and to be careful in addressing customer needs.

Agents have always been the lifeline for the life insurance business. How to do plan to make the best of this channel
We want to build a strong distribution channel that is high on quality and advice. Today when a life insurance conversation happens between an advisor and a customer, there is no clear understanding of what the latter needs. We can provide better advice through the way we design our sales process, the quality of people we attract, and the training we give them. We are also developing products that are flexible and uncomplicated.
We are also fragmenting the industry in ways that have not been done before. There are ways of looking at certain groups or geographical regions. There are very protection oriented plans like non-participating endowments that can be promoted. There are affinity groups that can be tapped. A lot can be done.

So far you only have two plans.
We have just started. In fact we have just had a soft launch in Delhi three weeks ago. So we need to add pension and health policies, and so on to our portfolio. We will complete our portfolio within the next one year.
As for our existing products, the Family Protection Plan is a pure term plan. In a term plan, in case of death of insured, the nominee gets the sum assured. Here, the nominee receives a monthly annuity. It will be more cost effective than a normal term plan.
Our second plan, Wealth Plus, is a unit linked insurance plan (Ulip). We have kept this plan simple, and offered a variety of funds options for different risk profiles. The charges too are competitive.

How do you plan to build awareness
We plan to run financial literacy programmes across different groups. Second, the moment of truth in this business is when the advisor talks to a customer about life insurance. That interaction holds the key. We are equipping our people to do need analysis. Customers usually talk about returns. But they should understand that life insurance primarily is about ensuring that your loved ones are taken good care of, in case something happens to you. Getting that change in the mindset is absolutely critical.

What is the capital base of the company right now
Right now it is Rs 100 crore. Both the shareholders have pledged at least Rs 1,100 crore over the next few years. Funding is not a constraint.

By when do you expect to break even
Breaking even is not necessarily a good thing. The faster a company grows, the more time it takes to break even. That is how the life insurance business works.

What are the varied distribution channels that you are looking at
Apart from direct sales force and employees, we are in the process of tying up with third party distributors, brokers and corporate agents. We are also looking at bank tie ups.

Do you think if the insurance regulator allows banks to have multiple tie ups with insurance companies, it can benefit new players like you
I think it is a good idea for banks to be allowed to tie up with different life insurance companies. Some companies might have strength in a particular region, some might have a better product. So for a bank to service a customer better, there should be ample choice available.