Wednesday, September 26, 2012
The life insurance industry is witnessing some fast-paced reforms. The last couple of years have been very tough for the industry as it has had to respond to reforms in a very short span of time. Rajiv Jamkhedkar, chief executive officer and managing director, Aegon Religare Life Insurance Co. Ltd, talks to Mint Money about the impact of these reforms and how their strategy to sell insurance online and through direct sales force has worked at a time when agents are leaving the market
The industry has seen constant re-forms in the last couple of years. How well have you been able to cope with it? What impact has a negative growth in the first year premium made?
The industry has seen significant and possibly game-changing re-forms in the last 24 months. Some of them are progressive, focus on customer value and transparency in products. But if you look at the developed markets, these changes happened over a period of 10 years or more.
But any change is disruptive and we are all keeping pace with the changes. These changes involve diverse aspects of the business: systems, products, trainingand distribution models. The industry moved from being topline (revenue) focused to one being focused on productivity and profits.
The insurance industry in India needs to grow as we are far from achieving reasonable penetration of long-term protection and savings. Therefore, new business premium growth is an important measure. Its decline is a cause of worry as insurance is a long-term business and new business premiums affect future renewal income and profits.
The needle of reform is pointing towards all aspects of the industry: product design, distribution as well as taxation. How much of a problem it is to design products in the current environment?
Product design involves many steps. It requires actuarial work, marketing and sales input, Insurance Regulatory and Development Authority's (IRDA) approval process, systems implementing the many features of the product and ultimately training of sales and service staff. This is a lengthy process and we should attempt at reducing the time taken to market products in order to boost innovation. We are trying to rationalize our product suite to a limited set and to simplify products to meet the above challenges.
Aegon Religare Life Insurance Co. Ltd was among the first insurers to launch an online term plan. Targeting the customers directly must have worked as a strategy at a time when the industry saw a mass exodus of agents. Your comments.
It has worked hugely in our favour. We have been able to attract thousands of customers through this route. We have built online as a key channel when no such precedent existed in the industry. Direct-to-customer accounts for 30% of our business currently. We are proud of the quality and sustainability of this initiative.
You now have an online unit-linked insurance plan (Ulip) and an online health insurance policy. Term is a simple product but Ulips and health insurance may need some professional advice. Your comments. What has the response been so far?
All our online products are simple to understand and we have a ready reckoner guide to assist customers to make the right choice. We show examples with the help of simple charts and animation to illustrate the products. We also have a service team for the customer to call and make enquiries. For example, our Ulip product has no allocation charge structure with simple fund options. Our health product is a fixed-benefit plan that is comprehensive (covers virtually all surgeries) and simple to understand in terms of claims. The response has been steady and growing.
Other companies are now focusing on bancassurance, a channel largely responsible for mis-selling. Why do you think that is so? What is the way out?
Bancassurance is an important channel. However, I agree with you that there has been mis-selling in this channel. Consumers largely trust their banks to give good advice and lack of trained staff at the bank leads to the customer buying a wrong product or not being told about the features or costs properly. Add to this, there is very little choice of products available at the bank because of one-company tie-up. We believe that opening banks to multiple insurance company tie-ups will offer consumers more choice. Of course, the level of training of bank staff should improve.
Recently, the trend has shifted towards non-participating traditional plans that don't offer an annual bonus but a guaranteed return. You don't have such a plan. Why is that?
We have not thought of launching non-par products. We believe in focusing on basic needs of the customer: protection against death, disability, critical illness; long-term savings for say children or retirement; and fixed-benefit health plan. Currently, we only lack a pension plan, but that is being considered.
You recently launched an offline term plan. What is the value-add to the customer considering you have an online term plan?
We are encouraging agents to sell term plans. This demand came from our branches and agents.
Your online term plan has riders. What benefits, in your opinion, do riders offer?
One buys term plans for basic protection. Riders offer two benefits. One, you can customize the product to your needs; for example, we have a women's critical illness rider that covers women-specific cancers. Two, riders offer greater and comprehensive protection at a cheap price.