The Hindu Business Line : ‘Insurers should do need-based selling’

In a long-term financial decision, short-term triggers should not play a significant role, says Mr Prashant Sharma, head of investments at Max New York Life.

Mr Prashant Sharma, Head-Investments, Max New York Life.

Suresh Parthasarathy

The risks associated with equity investments have increased substantially over the past year due to higher volatility and less certainty on companys’ performances. In an interview with Business Line, Mr Prashant Sharma, Head-Investments at Max New York Life, shares his management style and performance of the insurer’s schemes. Currently, he manages funds worth Rs 5,000 crore.

Despite the sops given in the stimulus packages, if market fails to gather momentum, will ULIPs be able to maintain their sales and current growth rates?

Life insurance is a long-term protection and wealth creation product. ULIPs allow the policyholder to take decisions on his investment portfolio depending on the risk profile and the existing macro conditions. It is important that life insurers as well as their distributors start focusing on need-based selling and offer products that best suit the customer. In a long-term financial decision, short-term triggers should not play a significant role; at best these triggers should be limited to taking tactical decisions to maximise returns over the long term.

The bellwether indices – BSE Sensex and Nifty – have lost 50 per cent plus from their peaks. Can you share the returns on your market-linked schemes?

In the calendar year 2008, our 100 per cent Equity Fund (Growth Super) lost around 47 per cent in value. The Growth Fund, with up to 70 per cent equity investment, lost around 31 per cent, while our benchmark CNX 500 fell by 57 per cent and Nifty/Sensex were down by 52 per cent during the same period.

We have heard that some insurance companies are using “mirror” accounts to manage their portfolio, with portfolio strategies replication those of mutual fund companies. Is this a fact? Does Max New York have any such arrangement?

We cannot comment on the practices followed by other companies. However, Max New York Life has a full-fledged research and fund-management team and all investment decisions are taken and carried out by the in-house team.

What is your strategy in picking stocks and how often you churn the portfolio?

We buy stocks that look attractive from a long-term risk-reward perspective. We prefer companies with robust business models, competitive positioning, long-term visibility and sound corporate governance. We generally invest with a long-term perspective.

However looking at the environment and the valuations, we do make some tactical adjustment to the portfolio, which could be in the form of changing cash levels, relative sectoral weighting and so on. We usually churn only when a particular stock meets our price target or the market is extremely volatile and that too is quite limited.

Several insurance companies are coming out with health plans. Are you planning to launch any health products?

Max New York Life launched in March 2008 Lifeline, a range of superior health insurance plans and comprehensive protection products. Lifeline series brings long-term insurance coverage for hospitalisation, surgeries and critical illness and it comprises three distinct groups of solutions.

The Medicash Plans are hospital cash plans that provide the customer a fixed per day benefit for hospitalisation, ICU admission, recuperation benefit and a lump sum benefit against an unlimited number of surgeries.

The Wellness Plans are critical illness covers against as many as 38 critical medical conditions from Alzheimer’s to liver disease, deafness to permanent disability, cancer to heart ailments, a range offered by no other insurer in India under one plan.

The safety net is a comprehensive term-plus health protection plan, offering the policyholder protection from any losses arising from critical illness, accident, disability and death. It is the only plan of its nature in the Indian marketplace.

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