Future Generali is backed by the Future Group, a game changer in the retail space. How has the brand name helped in the distribution of insurance policies?
Having the brand name of Future certainly helped in the distribution of the policies and we were able to leverage Future outlets for the distribution of insurance policies. We started the concept of mallassurance where we distributed insurance policies through the outlets of Big Bazaar. Our mallassurance presence is predominantly in Big Bazaars at this point in time. People connect with the brand name and the products were more acceptable.
Mallassurance is an interesting concept, but is it really successful? A consumer visits a mall to shop and doesn’t have time, or is not in the mood to sit and analyse personal finance and buy insurance.
You are right that people go to malls for instant gratification but we were amazed to see the response. People are extremely interested to know more. We recently launched an insurance week and over 1 million customers signed on balloons committing to get adequately insured. That itself is a manifestation of the fact that people are interested in insurance. Having said that we don’t always get to close the deal right on the spot, but that works as a starting point for us. Customers may not come to malls with a mindset to discuss their finances but they have leisure time and they can spend time to understand insurance. Policies such as Ulips (unit-linked insurance plans) and term plans are bought.
Even term plans?
Small-ticket term plans I mean. Like a personal accident policy. Big-ticket term plans are bought when agents visit their homes later.
Since mallassurance has been a hit, your distribution would not have been affected so much after the new regulatory guidelines became effective last year?
Mallassurance is still a very small part of our business. Currently it contributes to 5-8% of our new business. Agency channel still remains our largest distribution channel. Even we witnessed a slowdown in the sale of our policies due to reduction in commissions. We are promoting traditional products and introducing a range of Ulips to overcome the situation.
But traditional plans are opaque in terms of investment portfolio and cost disclosure. Why does Future Generali have a considerable portion of traditional plans?
After the Ulip guidelines, we had to file new Ulips and so the numbers are only catching up. Having said that, I agree that we have a considerable presence in traditional plans space. We have always believed that investments through insurance has to be “Ulips and traditional plans” and not “Ulips or traditional plans”.
I agree that investment and cost structure are not disclosed and yet you know your guaranteed return in a traditional plan. They are meant to lend stability and security to ones investment portfolio.
But you began focusing on traditional plans only after Ulips sales were hit.
We have always maintained a balance of traditional and Ulip plans in our product portfolio; this has been a cogent strategy since inception and our traditional portfolio has been built during the course of the past three years.
So are you also looking at variable insurance products (VIPs) since they also offer a minimum return?
Universal life policies, which are now called VIPs, have also undergone some regulatory changes. There is a minimum guarantee that one needs to offer and the cost structure makes it difficult for us to launch a VIP.
A lot has changed for the insurance industry. Even the direct taxes code (DTC) has surprises for you. Your comments.
Under the proposed DTC, insurance policies are clubbed with health insurance and tuition fees, and have a collective deduction of up to Rs 50,000. For an individual who is married and has kids, tuition fees is a given expenditure and hence the deduction will get exhausted through tuition fees alone. How will consumers get encouraged to buy insurance? Life insurance should have a separate deduction and since it is a long-term contract and also helps individual save for long term, insurance policies should also be given the EEE (exempt, exempt, exempt) status as other long-term savings plan. DTC has made life insurance EET (exempt, exempt, tax).