`Standardised products will reduce scope for mis-selling'

Private life insurer Kotak Mahindra Old Mutual Life Insurance is gearing up for product approvals as per the new product guidelines by the insurance regulator. In an interview with Business Line , G. Murlidhar, Managing Director of Kotak Life, thinks the near-term uptick for the industry will depend on two key factors — the pace at which the industry is able to adjust to product changes and economic growth rate.

He says that his highest priority is to align products to the new product guidelines. He thinks the company has done well in managing expenses and keeping costs under control and will pay more attention to improving distribution efficiency.

Excerpts from the interview:

How many products have been approved by the Insurance Regulatory and Development Authority so far?

As of now, all unit-linked products and two traditional products has been approved. The remaining traditional products too should get approved soon. We look forward to have all product approvals in place at the earliest

IRDA has given the industry three months’ extension for launching the new products? How will it help?

The extension is a welcome development. The extra time will make the transition from the old product regime to the new one smooth.

Do you see the costs of the new products going up?

Additional mortality benefit has to be given because a 10-fold increase in protection limit has been prescribed.

While this will have a bearing on the cost of the product, the important thing is that the protection shield for the policyholder becomes much stronger, and that is the essential purpose of insurance.

Do you see pension products making a comeback for Kotak Life?

In the past pension products constituted about 15 per cent of our portfolio.

The immediate priority of course is to align all our products to the new product guidelines.

What are your views on banks becoming insurance brokers and selling only standardised products of multiple insurance companies?

It’s a good start. Banks are the most efficient means of distribution, and the move will give a leg up for insurance. Importantly, the move will afford customers a wider choice.

With regard to standardisation, we are fine with banks selling standardised products. As a bank employee sells multiple products, standardised and simple products will reduce the scope for mis-selling arising out of confusion on account of product design or features.

Simplicity works even otherwise. If we keep products relevant, yet simple, cutting room for customer or agent confusion, customers will be that much better advised, improving persistency and serving the cause of insurance better.

But then won’t pricing becoming more competitive, because the only differentiator will be pricing?

Efficiency will be the keyword. So it is not a zero-sum situation. Importantly, when pricing gets competitive, the customer will benefit.

What steps have you taken to curb mis-selling?

We have taken a lot of efforts to curb the menace of mis-selling.

Products have been kept simple and easy to understand, yet relevant. Enormous emphasis is placed on training agents, sales partners and staff.

Verification call even before login and confirmation call after login ensure weed out any instance of mis-selling at the point of entry.

Further, any case of mis-selling is dealt with very seriously, and the culprits are either terminated or subject to legal action.

What is the distribution break-up for Kotak Life? Overall, has the number of agents come down?

At present, bank channel is about 35 per cent, agency around 40 per cent, and the remaining is through brokers and direct channels. Our agent numbers have in the last quarter.

The recent move by the regulator to cut the pass percentage has helped a lot, and has seen more agents coming into the system. Currently, the number stands at around 39,000 advisors.

Will you consider listing?

We are well capitalised and have no listing plans. From an industry perspective, improved macro-economy, higher foreign direct investment and valuation considerations will remain key parameters for those looking to take the market route.

How do you see insurance repositories helping the industry and customer?

Moving to electronic policies offers insurers an opportunity to reduce costs and improve service.

The upfront cost involved is fine because we are a long-term industry. Customers can now adopt a single window approach, and, importantly save themselves the hassle of keeping and maintaining physical policy copies over typically long terms.

>deepa.nair@thehindu.co.in

COMMENT NOW