‘FDI increase in insurance should be without riders’

At a time when the life insurance industry is struggling with growth, the Anil Ambani Group-promoted Reliance Life Insurance has recorded a 40 per cent surge in its new business premium income in the financial year ended March 31, 2014. Anup Rau, Chief Executive Officer, says growth of the company, in which Nippon Life Insurance has a 26 per cent stake, has been driven by a significant improvement in agent productivity and average ticket size per policy sold. Excerpts from an interview:

If the FDI cap is raised to 49 per cent in the life insurance sector, what immediate impact do you see?

Nothing much will change materially as most of the large players are well capitalised, but FDI is critical for the long-term growth of the life insurance industry.

In my view, if the FDI cap is raised, it should come without riders such as an artificial cap on voting rights.

The regulator has come out with tough norms on replacement of life insurance policies (by surrendering one policy and buying another) to ensure that there is no mis-selling. What are your views on this?

While the regulator has brought out these norms, the industry has been working on reducing mis-selling by implementing the claw-back commission clause and other measures. At Reliance Life, over the last one year, we have been adopting strict policy verification measures such as verification calls after every policy is sold to reduce mis-sale.

While the mutual fund industry has been seeing in-flows due to the expectation of a long-term bull run, the life insurance industry has been facing the surrender of policies. Isn’t this a worrying trend?

Most life insurers have been forced to shift to selling traditional products, as unit-linked insurance plans are not viable in the current charge structure (relating to low commission), especially through a non-bancassurance channel. The surrender charges in Ulips are very low in the current structure. We have asked the regulator to look into these issues. However, I feel that if there are changes, then Ulips will definitely make a comeback. Banks have opposed the Finance Ministry’s directive asking them to act as insurance brokers as they feel there are too many operational issues. What are your views on this?

My view is that as insurance brokers, banks will be able to offer more choice to customers. While there may be operational challenges in becoming brokers, ultimately they will be acting in consumer interest.

The life insurance industry worked on very thin margins and low profitability during the last fiscal. Will this scenario continue?

The industry will see thin margins as Indians are essentially value conscious. Overall, we are focussing on improving the productivity of our agency force which is around one lakh. We are confident of double-digit growth in 2014-15, with a focus on traditional products and improved quality of business, which will be reflected in the form of increased average ticket size.

What innovations are you looking at?

We have recently launched a unique initiative to pay claims within 12 working days of receipt of all required death claim documents. We are one of the few life insurers in the industry which ensures settlement of all claims on life policies in less than two weeks and pay interest at the rate of 6.5 per cent per annum in case of a delay.

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