Predominantly savings-oriented in India, the life insurance industry has seen a sudden shift of focus towards protection not only by the industry players but also by customers. Prashant Tripathy, MD and CEO, Max Life Insurance, told Sandeep Singh that over the last six months, there has been a massive rise in awareness and demand for protection products. He said going forward, the industry will come out with universal protection designs for masses who can’t afford expensive products. Edited excerpts:
How is the impact of Covid on industry now?
Things are better than expected. In April and May, the industry was down by around 40 per cent, but things have been improving with every passing month and for us the numbers have been better than the broader industry. We have seen 4 per cent growth as compared to 11 per cent decline for private sector in September. But the overall industry is coming out of it and I am more hopeful for the second half. As far as claims are concerned, while there was a surge over the last couple of months, it not alarming. I also think that we hit a peak in September and so the claims too will settle down.
Fear leads to increase in demand. How do you see Covid playing a role in the overall penetration for the insurance sector?
Though it is not good to say that Covid has been good for life insurance, but in the truest sense, it has certainly created far higher level of awareness. Historically, the industry has been predominantly savings-oriented — almost 95-96 per cent — but over the last six months we have seen a big growth in protection part. Last year, protection accounted for 8.6 per cent of our total sales, but in the first five months of this year it went up to around 15 per cent. Honestly, I thought it would take us 4-5 years to reach that level.
So there has been a big jump and it is leading to higher level of protection across the industry. I think moving towards protection is the right direction.
Even in the health insurance space, some standalone health insurance companies have seen 30 per cent growth and that too is a reflection of fear leading to right decisions being made. It will create a quantum shift with respect to where the market has been and there is higher level of acceptance for protection plan. Equally for providers like us it will be much easier to convince the customer.
If you see awareness and fear converting into outcomes, it is happening. However, the level of fear has subsided quite significantly over the last couple of months. Even as numbers are increasing, as people realised that mortality is moderate at around 1.2 per cent, the fear is going down and Google searches are subsiding.
In the past there have been SARS and Ebola, but Covid has hit the way nobody ever thought. How do you see this will shape the industry in terms of innovation and customer orientation?
There are shifts that are taking place. Some are more tactical or short-term and some long-term. Both the regulator and ministry have been very conscious and driving things that cater to Covid needs. We launched Covid riders that can go with our products and where customers get a part of the sum assured if they test positive.
Irdai has been pushing general and life Insurance companies to come up with Covid plans and that is going to remain for at least 18 months. Also, there has been a shift towards selling more non-participating kind of offering which is savings-oriented — guaranteed savings benefit— because interest rates have come down. Life insurance companies have unique advantage of leveraging the longer term interest rate.
What in the long term?
Protection as a need is becoming more and more prevalent. Slowly, regulatory and other bodies are realising that protection is not only the need of the top of the strata, it is the need of everyone.
Hence, there will be push towards universal protection designs — simplified products that may have same features but will cater to segments that can’t afford expensive product designs. I think life insurance companies will also slowly start venturing into health. There is (a) committee which has been set up to review that. Even if the committee doesn’t (allow) life insurance companies to operate in indemnity space, I think they will have the riders space. Also, because of social security concerns, immediate annuity or annuity related plans will become prevalent. While a life insurance license allows companies to operate in multiple zones, but because of legacy reasons etc, we have operated only in equity and savings. I think that will get expanded further and will become much sharper.
Do you think there should be focus on the retirement aspect too?
We have been lobbying for some bit of change around regulation, the tax treatment of annuity, we have also made request on treatment of commission with our own regulator. So there are some structural issues that we are working through. Also, the level of awareness on these products is low. My sense is that there has been supply side constraints too. So there are issues on all fronts — structural, demand and supply side and as things evolve, all of that will start getting fixed.
📣 The Indian Express is now on Telegram. Click here to join our channel (@indianexpress) and stay updated with the latest headlines