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The life insurance industry has been going through tough times after its bread-and-butter product, unit linked insurance policies (Ulips), changed shape and face following the Irda's stringent regulations. Many insurers had to withdraw Ulips that did not meet the new guidelines and the industry is still trying to get its act together. Max New York Life is among the few players that has managed to maintain its sales numbers in the first quarter, says Rajesh Sud, managing director and CEO of the company in an interview with R Srividhya. Excerpts:
The first quarter financial figures for life insurance companies seem to indicate that the industry has still problems adjusting to the new Ulip regime, resulting in fall in sales for many companies. What is your take on the Q1 performance of the industry?
At Max New York Life Insurance we have transited well into the new Ulip regime. The new regulations gel well with the fundamentals of life insurance that we've been pursuing, of life insurance being about selling long-term products and not just pension or saving. The regulations also focus on the importance of face-to-face interaction. Insurance selling is done well through a good sales distributor or bank intermediary. Our emphasis on good training, advise and quality of advisers helps us.
In the past, few companies did not pay attention to this aspect and those are the ones that are facing difficulties in adjusting to the new regime. Insurance sales needs well trained, motivated advisers. It is not just about selling an investment product.
It appears there has been a significant drop in the contribution of Ulips towards overall sales for most life insurers. The contribution of Ulips has definitely changed because of the regulatory changes. It is partly due to scarcity of Ulip products in the market. Many of us had to withdraw the existing products and launch new products. At least 300 Ulip products were withdrawn but only a few were introduced. So, there has been a gap in the product suite for most of us. Companies are still trying to launch new products that adhere to the new guidelines. So, shortage of products in the market is also a reason for drop in sales. Then, there is also the impact of competition that is affecting business.
How do you see the new pension product guidelines issued by the Irda?
What should not have happened in the industry is that competition among players should not be risk-based. Someone who takes a higher financial risk ends up getting a market today but may not remain solvent over a period of time. The world markets are volatile and one should not assume that India will remain isolated from these incidents forever.
There are a few areas of concern in the draft guidelines. In annuity products, where insurers give a fixed price annuity to the customer, there are two risks - the risk of longevity on which there is very little data available, especially with medical technology improving with every passing day and second is the institutional risk where the corporate market is also not deep enough for us to have products for 30-40 years and see the returns coming through. These are the important points that we would like to discuss at the industry level on the draft guidelines for pension products.
How is the volatility in the stock market impacting the performance of Ulip products? Are companies seeing a lot of withdrawals happening at these levels?
At our company, we have a very healthy investment mix that also has outperformed benchmark indices. The nature of stock markets is that it moves up and down and customers should have also invested in Ulips knowing this very well. Life insurance is not a trading account but a long-term, sustainable way to build a large corpus. A fall is not a trigger for people to sell.
There are customers who know that value of life insurance and consider life insurance policies to be safe instruments. If customers are going to look for returns in life insurance policies, they may be disappointed. They could rather buy traditional products. Those who bought Ulips when the markets turned down, if you ask me if they are worried about the performance, I would say, "Yes they are." But only few choose to surrender the Ulips.
How difficult has it been to deal with insurance agents who work for lower commissions now? Will there be a higher shift towards other channels like bancassurance, online or direct selling in the days to come?
Customers, when taking life insurance policy, prefer face-to-face approach. There is need for customers to understand the need, product and make an informed choice. For that, the agency channel is the best mode. There are challenges in finding committed advisers, but that is where industry has to focus. If you have poorly trained agents leaving the business, then I would say it is only good for the business.
At MNYL we followed a multiple distribution approach. We get 50 per cent of our business from agency, 27 per cent from bancassuance channel and the rest from other channels like corporate agencies. There has already been a shift predominantly from agencies.
How is the rest of this financial year expected to be for life insurers?
We are on course with our projections. This is a year when large-scale growth may not occur due to the changes made last year. Overall, the industry may see a pretty much flat growth. We intend to outgrow the industry for sure.
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