cover provided, etc. However, to provide a fixed guarantee at the outset on the amount of a surrender value, the insurance company will certainly need to constrain its investment freedom and this will limit the potential long-term gains for all policyholders.
How do you think the bancassurance guidelines proposed by Irda will help penetration of life insurance products?
This is a step in the right direction and will help insurance companies make further inroads. This will help companies pursue newer relationships with banks to widen their presence and achieve an optimal channel mix. Further, the proposed Bancassurance architecture guidelines will provide more options for the customers and will also help increase the reach of insurance products through the wide network of banks.
All pension products will have to have annuity component and the products will have to be non-zero positive rate of return. How will insurance companies work out the annuity payout? Have you filed any new pension plan?
It is important to note that it is not stipulated that insurers guarantee the amount of annuity payout at the commencement of a customerís pension policy. Hence, the need to hedge the investment risk inherent in such an arrangement does not exist.
We work out our annuity rates at all points in time by taking into account likely investment returns over the annuitantís lifetime, the expected longevity of the annuitant and the expenses of administering the annuity.
We share with clients our existing annuity rates, and help them understand that these could change over time as and when investment conditions change. In terms of providing the long-term investment guarantee on the underlying pension product, we ensure that the quality and amount of assets that we hold are more than sufficient to provide for the guarantees we promise. Yes, we have filed a number of innovative pension and annuity products, which will provide customers with excellent returns over time.
How should distributors and agents be sensitised about selling insurance products to retail investors, especially after the spate of regulatory changes?
There is a continuous focus within the industry to promote a culture for need-based selling. This is being done with help of appropriate training and segmentation process. There is a thrust towards maintaining superior persistency.
There is a clear focus on right selling. If the product is sold right, a bulk of the job is done since the policyholder is fully aware of what he has bought.