In terms of individual adjusted premium, the life insurance industry shrank almost 10% last year. However, growth has picked up in the first quarter of this financial year. How do you see the industry growing for the full year
Last year was special because of the product changes that life insurers had to do and it was almost like a restart. The process of filing the product was just one element and we had to train agents and explain to customers. The economy was not growing, and all these put together, affected the industry.
In distribution, the number of individual agents has come down. Banks have done better in selling insurance products as they are much more organised and have the trust of their account holders. This year, we should see a revival in growth as the products are in place now. The increase in the 80C limit to R1.5 lakh will also help.
Are life insurers moving more towards bank-led distribution model
The trend is quite visible in the past five years. Last year was the tipping point when banks, for the first time, became a dominant channel of distribution. There are a few banks who have fully understood how to sell insurance and others who are testing waters.
There are discussions on turning banks into brokers. But just by offering more products, there is no guarantee that banks will not be guilty of mis-selling. So, the answer should be how we create a better code of conduct and good governance. The objective is to have trained manpower to sell the right product.
The share of Ulips is sharply falling. At your company, are you taking a relook at this segment given that the Sensex is touching new highs
Customers want the best of everything from insurance. They want stability like a traditional product, returns like a unit-linked product and guarantee like bank deposits. In our surveys, we often find people who expect 25% returns from insurance products and, in the same breadth, talk about safety. So, the awareness about markets and products will have to improve. We will see Ulips grow because of the changes; they are good products for those who understand them. But its not for those who are risk-averse and have no understanding of the markets. We are looking at a 65:35 mix of traditional products and Ulips.
Is more clarity required in terms of products structuring, given that there are lesser number of products in the markets compared to, say, two years ago
The guidelines do require clarification from time-to-time and this is an ongoing process. However, we are working with the regulator on the cap of five products launch in a year. One view is that there should not be too much product proliferation targeting the same customer. That is fair and justified. But we do believe that five products are constraining for an industry size like ours. The industry has given its representation to the regulator.
How are life insurers looking at the annuity products
Our surveys show that Indians are financially vulnerable as far as retirement is concerned and most cannot survive loss of income beyond 45 days. Thats how precariously we are placed. For most of us, instant gratification is more important than putting money away in a stable platform for 15 to 20 years. We have seen in other parts of the world where retirement has become serious and there is a government mandate.
In India, it is on a voluntary basis. So, if the government says that every individual will have to compulsorily save for retirement, you would see a surge in annuity products. Then, the other problem is that annuity is taxed and this is where the government needs to work. Annuity products of insurance companies now have become very attractive as they have to give positive returns and the overall expenses are quite low. However, insurers need a long-term and vibrant market to invest money and take care of the long-term risks. We need to look at derivatives and zero-coupon bonds.
Do concerns about reliability and unfamiliarity with the online medium for buying insurance still outweigh the benefits in terms of speed and flexibility for customers
Online presence is important as the medium is growing. But it will not overturn the brick-and-mortar system that exists today. Customers look for information online but when it comes to finally buying a product they need some help offline. There is some inertia to make the investment as somebody needs to help the customer to take the final step and thats where offline channels come into play. So, the regulator should look into the issue that if an online consumer needs help from an offline distributor, that should be permitted and the distributor must be compensated.