Aegon Religare Life Insurance is the 20th entrant into the life insurance space. Worldwide Aegon is one of the top five players in the insurance and pension space. In this interview, Rajiv Jamkhedkar, chief executive officer of Aegon Religare Life, tells our correspondent why for long-term investors unit linked insurance plans (Ulips) are superior to mutual funds.

You have entered the markets at a very volatile time. How has your experience been so far in terms of subscriber base and premium collection?
We have 4,250 policy holders at the moment. Last month our premium collected stood at Rs 2.9 crore. This is our second month of operation. We hope to clock Rs 5 crore in the next two months. In terms of premium collected, 28 per cent has been from the term plan and 72 per cent from the Ulip.

You have just six products at the moment. There is no traditional plan or health plan. Do you plan to expand your portfolio in the near future?
We started with six products and two riders. Three are term plans, three are Ulips and two are riders. These products were adequate for the launch. Within two months, we will introduce a product for the rural sector and a pension plan. We will also introduce a traditional plan and a health plan between January and March.

With a few mutual fund houses offering life insurance cover with SIPs (systematic investment plans), the competition between life insurance and mutual fund industry has heated up. What do you have to say about this?
I don?t think these industries are comparable at all. First, all Ulips offer life cover, which mutual funds don?t. Second, Ulips offer a long-term solution to customers. They offer flexibility and control to customers, unlike mutual funds. For instance, we offer a wide choice of funds and customers can switch between funds. Customers take control of their portfolio here. Ulips provide coverage, they are long-term in nature, and they offer flexibility and control. They have a niche of their own.

But don?t mutual funds offer greater flexibility? In a Ulip one has to stick with the same fund manager, but in case of mutual funds one can change if one is unhappy with fund performance.
No, I don?t agree here. We have different fund managers to manage different funds. We have managers for debt fund and for equity funds. The four fund options we have offer flexibility. And we allow four free switches per year.
The approach of a fund manager managing a Ulip is also very different from that of a fund manager managing a mutual fund. The fund manager in life insurance thinks of safety first. He takes a long-term approach to investing. Mutual fund managers, mostly equity fund managers, have a more return-oriented approach. So the approach to fund management is also different.
People who want to invest long term and want safety first will look at Ulips. This is the tool that will help you save for the long term, whether it is for your retirement, or for children?s education or some other goal. People who are more inclined towards high returns and are investing for comparatively shorter time will go for mutual funds.
A savvy investor should, in fact, invest in both. And if you are not that savvy then too Ulip is a safer bet.

Aegon has significant presence in the US, the UK and the Netherlands. These are the markets that have been hit hard by the financial crisis. How has the crisis affected Aegon?
Aegon is one of the top five players in the world in the insurance space. It concentrates mainly on pensions. The companies that have been hit in the global financial turmoil are banks. Trading of securities was done mainly by banks. Aegon is not a bank, so that is the first distinction. It has no banking portfolio. It is a pure life insurance and pension company.
Aegon has had a bit of exposure to such securities ? a very small amount to Lehman Brothers and Washington Mutual Fund.
Apart from that, Aegon carries AA rating, which I don?t think very many companies have. And its liquidity situation is pretty strong.

The Pension Fund Regulatory and Development Authority (PFRDA) is planning to open up the new pension scheme (NPS) to private citizens some time next year. They will offer a choice of four fund managers and low charges. How do you plan to compete?
I can?t disclose the details of our pension product. Just like life insurance, pension too is a heavily under-penetrated sector in the country. The pension market is a big one and there is space for everybody. We will be able to compete with NPS. We have a product differentiation and a service differentiation, which will make customers come to us. Our targets are different and we will concentrate on them.
We are putting the final touches to our pension product and will unveil it in a couple of months.

By when do you hope to break even?
For the company as a whole, we expect to break even in eight years. Besides, we have set a target for our branch offices as well. We expect our branch offices to break even in less than three years. That is the strategy for sustainability and cost efficiency. If we are able to manage these targets, we won?t have to trade off our top line growth for bottom line growth. We want profitable growth.

Which distribution channels are you using?
We have a multi-channel distribution approach. One is the tied agency channel. We have 45 branches in 45 locations. We currently have 550 agents and in a year?s time it will be 680. The second channel is Religare. Religare Enterprises has 12 companies under its roof. Religare and its companies will act as our distributors. Third is our employee channel. And the fourth channel is corporate agents and brokers. We have three corporate agents at the moment in the South.

Why have you not gone for bancassurance tie-ups?
We don?t have any bank partner right now. We believe these four channels are enough to give us business. After year two we will look at this channel.

The Insurance Regulatory and Development Authority (IRDA) is planning to come up with a roadmap for risk-based capital by March 2009. Do you think the industry is ready for this? And how will it help the end consumer?
Aegon group is already based on risk-based and market-sustainable model. We are preparing ourselves internally. We believe that is the way forward. And that is the way everybody is moving the world over. The simple reason is that it takes care of the various risks in the product and gets reflected in the capital structure. It will make companies more efficient, which in turn will get passed on to customers.

Any plans for the micro insurance space?
There are no plans as of now. We will look at this segment later. For the time being we will launch products for our rural and social markets. We will develop products for the micro insurance sector from year two.