Since the new unit-linked insurance plan (Ulip) guidelines became effective, insurers have become a little conservative in launching Ulips. Now we see two-three plans per insurer, whereas earlier there was a barrage of plans in the market.
I think it is just a matter of time before more plans are launched in the market. Having said that, there is a lull in the market, which is more a manifestation of analysing what is right. The industry is looking at cost structure and productivity under the current regulatory changes. Subsequently there will be more Ulips. We have filed three more Ulips, of which one is a guaranteed plan.
Speaking of guaranteed plans, post 1 September plans that guaranteed the highest net asset value (NAV) were quite a rage. Tata AIG life also has a plan in the capital guarantee segment. However, these plans are very complex and charge more. So why did they become popular?
Investors fall under different segments. Some are risk takers, some are conservative and still others lie somewhere in between. Capital guarantee plans are meant for those investors who like to have a balance between risk and return. It is this feature of the capital guaranteed products that makes them popular.
But they are extremely complex plans. And while the investor may actually believe that highest NAV means highest return, the truth in the stock market is quite different. Selling such plans would require you to train you agents thoroughly.
I agree these are complex plans and for this reason we do not allow all our agents to sell these plans. Training is very important and we take special care to make our agents understand what the plan is all about and who the investors are. Or agents undergo comprehensive training and tests before they go out to sell these products.
As a result of the regulatory changes, we also saw a resurfacing of traditional insurance-cum-investment plans. Is the trend here to stay?
Historically speaking, traditional plans were doing well till 2003-2004, when Ulips were introduced and gained popularity thereafter. Ulips soared as a result of the bull run in the stock market and since the product was more transparent, it became dominant. Now what we see is a phase of finding a balance between products. The industry went back to customer needs and is now re-positioning traditional plans. While Ulips will continue to stay, traditional plans are also important for conservative investors. Variable insurance products have also hit the market. We are looking at the product and will be launching one soon.
Under the current regulations where commissions have dropped drastically and so have sales, distribution has become a challenge for the insurers. We see more insurers come forward to offer term plans online. Could you describe some key trends that are likely to shape up?
Yes online is a very powerful yet cost-effective medium and while we may not have the first mover advantage, we are exploring the idea. We don’t have our term plan online yet, but we have our health plan, pension plan and a traditional endowment plan, called Maha Life Gold, online. However online requires an offline interface regarding health check-ups and KYC (know-your-customer) norms and so it has its own limitations. While online will gain popularity, I think we will see channel-specific product suite. Instead of giving all products to all agents to sell, there will be segregation. In the bancassurance space, open architecture will help where an insurer can tie up with more than one bank to sell. Insurers will leverage this channel. However we are waiting for the regulatory approval.
Year 2010 has been rather tough on the life insurance industry. What are the challenges for you in the coming year?
First is to maintain the growth momentum for which we need to focus on products that we launch, customer segmentation and productivity of our distribution channel. Second is profitability and third, of course, is to manage our costs.