Dont expect premium rates to decline post new regulations

Written by Saikat Neogi | Updated: Jul 24 2012, 06:00am hrs
The Insurance Regulatory and Development Authority (Irda) has come out with draft guidelines on the design of life insurance products. All the existing products will have to be modified and refiled with the regulator. And those which are not modified cannot be sold after September 30. Deepak Mittal, managing director and chief executive officer of Edelweiss Tokio Life Insurance, in an interview to Saikat Neogi, says there will be a flurry of product filings and to get new product approvals. He adds that training the agency force and other channels on new set of products in a short span of time is going to be a major challenge and even the IT systems will have to accommodate and allow for new changes that will require significant effort.

How would the new draft guidelines on life insurance products change your product matrix and what are the key implementation challenges

Insurance products cater to very important needs of life and health protection, but they are also used to support other important savings-related needs, including education, retirement, wealth accumulation and wealth enhancement. The new draft guidelines, in the current form, may restrict product designs for such needs.

Being a new player, we have not yet launched our full product range, but the guidelines will impact our portfolio too in terms of designing products to meet the needs of the customers. On the implementation front, it may lead to a flurry of product filings and to get new product approvals. To achieve this in a short period will be difficult. To train the agency force and other channels on new set of products is going to be another major challenge. The IT systems have to accommodate and allow for new changes and will require significant effort.

Since the existing life insurance products that are not modified before September cannot be sold, will it mean there will be very few life products in the market from October

The guidelines were circulated for comments and the concerns have been communicated and discussed with Irda. The guidelines may lead to paucity of products in the near term. The regulator understands the issues raised by the industry. So, we are hopeful that the concerns will be addressed and also the industry will get sufficient time to implement the changes.

The draft guidelines mention that except for mortality charges, there shall not be any other explicit charges levied to the policy holders. Does that mean the premium rates will drop in the future

Prima facie, the guidelines do not indicate such a change. Mortality charges are to cover the claims cost and the other charges are meant to cover the expenses, commissions and capital costs. They are equally important to run the business and Irda has been aware of the same.

Going ahead, are you looking at pension products, given the fact there are hardly any pension products in the market What are the other products you are planning to launch in the next one year

Pension and annuities present a large market for insurers and given the fact that there are only a few players present, we see enough growth opportunities in this segment for a new entity like us. We plan to launch pension and annuities this year.

How should distributors and agents be sensitised about the various aspects of selling insurance products to retail investors

Retail investors are continuously evolving and are looking for knowledgeable advisors who understand and focus on the needs of the customer. At Edelweiss Tokio Life, we have been training our sales force to adopt a need-based sales approach.

What would be the key factor that will determine growth of life insurance industry and what will be your focus in the current and next financial year

A customer-centric approach will go a long way in channelising the household savings towards insurance. We would like to develop a quality distribution team with better productivity and have a controlled expansion in new geographies. We will like to explore the opportunities in the pension/annuities and health segment.