Trying to make life insurance as simple as buying a fixed deposit, says ICICI Prudential MD
Sandeep Bakshi, Managing Director and CEO of ICICI Prudential, the largest private life insurer, says the company plans to alter the way insurance is sold -- the company is positioning itself as a technology company selling insurance. In a manner, that resembles the strategy of its parent, ICICI Bank.
Bakshi feels it is necessary to break the myth that the insurance industry can grow purely through pushing paper and hard selling of insurance products.
To that end, the company has gone all out in encouraging its agents to become more tech-savvy and complete all KYC formalities for customer acquisition in just a few minutes through the help of tablets.
Leveraging on the database of UIDAI’s Aadhaar card, the company has been able to shorten the number of visits that an agent makes to a customer premises. This is expected to lead to a quantum jump in productivity of agents with consequential improvements in retention and costs. Edited extracts from an interview:
Is the life insurance business poised for an upturn in premium collection?
We have taken a view that returns to customer is non-negotiable; so we have to play around with our profit, cost, and distribution payout.
We need to be a technology company selling insurance and really simplify the product construct. We have increased our underwriting limits significantly so that 96 per cent of our policies now don’t require medical tests.
So, all our focus is on why life insurance cannot be as simple as buying a fixed deposit.
Many best-selling products of the industry, such as the highest net asset value plans and variable insurance products, have exited the market after the regulatory changes. Are they hampering innovation?
I agree, but ultimately the variable insurance product was an equivalent of the fixed deposit product with a two-and-a-half per cent band within which we have to cover the cost.
My guess is that we can keep doing product innovation, but the real innovation has to be in the delivery of products.
Pension products seem to be making a comeback in the industry. Are you concerned about the longevity risk on annuity?
Pension, with the new set of regulations, will be one of the major growth segments.
Earlier, what the industry was selling was directionally investment-oriented products compared to what we are doing today, which is the real pension product with mandatory annuitisation. The annuity market is also linked to the development of the long-term debt market. Today, the large part of the debt market is operating in the 10-12-year cycle.
So, there is a reinvestment risk. The growth of the debt market will see issuances of 20-year, 25-year and 30-year debt instruments.
Surrender profits are expected to dry up for the industry in the short term due to regulatory changes. Won’t it impact profitability?
The profit stream of any company depends on shareholder funds, mortality charges that used to be minimal but has now risen 10-fold, fund management fees, policy administration charges and surrenders.
The health of the industry would be a lot better if the surrender profits come down because they represent some degree of disconnect with the customer. And, the quality of profits will improve significantly.
Are you looking at any changes in distribution?
We are a multi-channel distribution company and we believe that’s the only way to go as a de-risking strategy. So, we will be a multi-channel and multi-product company.
We were at one point in time a 90 per cent ULIP company, today we are 60 per cent ULIP and 40 per cent traditional products.
Similarly in distribution, we have bancassurace, agency force, proprietary sales force, corporate agents and online channels. We will keep investing in each of them.
As a bank-promoted insurance company, what are your views on banks distributing multiple insurers’ products as brokers?
We will have to see what form and shape it takes.
I know it has been under discussion and there are various formats which have been spoken of.
For anything, there are merits and challenges and I am sure the broker model will have both.
If you ask me, I would always say let status quo continue, but if there is something else happening, then we have to shape ourselves accordingly.
If you ask somebody who doesn’t have a bancassurance tie-up, they will say open up. At a principle level, what I feel is that opening up requires a much larger understanding of the larger implication and the products have to be absolutely safe for the customer.
If the products are complex, how can a bank manage four or five companies when there is so much difficulty in aligning with one company?
So, if that has to be done, the products need to be made standard and simple.