Tokio Marine Holdings Inc, your foreign partner, has expertise in non-life insurance business and calls itself the second-generation life insurance company. So why did you choose it as a foreign partner for a life insurance company?
Tokio Marine has been in India for a long time (through IFFCO-Tokio General Insurance Co. Ltd) and so it understands the local market. In that sense, we found a partner with some local experience. Often big firms are averse to localization but India has its peculiarity in terms of products, distribution and business models. So having a partner who has already studied the Indian market helps.
Deepak Mittal, Managing director & CEO, Edelweiss Tokio Life Insurance Co. Ltd
Talking about distribution, the life insurance sector in India is beginning to exploit other channels of distribution such as the online platform and bancassurance. Since you launched after the reforms of 2010 were in place, one would imagine you would focus on cost-effective channels, but you still have a strong agency workforce. Do you think agency will continue to dominate?
Actually, I don’t see a major shift happening. For insurers, who have an aligned ownership with the banks, having bancassurance means offering one more product to their customers. But often the insurer has less control over these channels if you compare them with the agency channel. I think agency channel will remain important, but better training and service is needed to enhance agents’ productivity. The advantage we have is that during our planning stage we tracked the reforms closely and directionally we could see where the insurance industry is headed. So we have ensured that distribution is such that it translates into customers getting products at right value points.
How have you trained your agents to be able to offer products at right value points?
To start with, our agents don’t sell products in isolation but according to the needs of the customer. Instead of classifying our products as endowment or unit-linked insurance plans (Ulips), we classify on the basis of needs such as child’s needs, income replacement need, wealth creation need and loan repayment need. The agents are trained in such a way that they understand the products through these needs and do a need assessment of their clients.
Coming to products, insurers are now beginning to switch to traditional products from Ulips. And in the three months of your operation, you have also shown a strong tilt towards traditional products. Is that because Ulips don’t make good business sense anymore?
The period of dominance of Ulips was a period of bull run in the equity market. But customers have largely associated insurance with stable returns. In that sense, traditional plans are the perfect fit. In fact, we carried out a survey two years back where we surveyed people who had recently bought insurance and in that about 20% of the people had said they bought Ulips when actually 65% had actually bought Ulips. So most of them didn’t even know that they had bought a Ulip. They assumed Ulips gave higher stable returns. Essentially that happened because of how Ulips were sold. But now seeing the volatility in the market customers once again want insurance plans with stable returns. And with increasing awareness, traditional plans are making a comeback.
What plans do you offer?
As I said we have need-based plans, so we have a plain vanilla term plan, a term plan that helps in income replacement, a credit insurance plan and traditional child plan and a Ulip with three variants.
Most insurers would offer a bouquet of Ulips. But you have only one Ulip with three variants. Why is that?
That is because the scope of differentiation in a Ulip is limited and for minor feature differentiation we did not want to launch separate products. If you see the variants are on the basis of death benefits. So instead of focusing on minor tweaks and managing different funds, we just have one Ulip with variations so that we can focus on the performance.
Life insurers are also making inroads into the health insurance sector. For you having a foreign partner with expertise in the non-life segment, health insurance must be an obvious addition to your product suite.
In health insurance, I feel it is the service that matters the most. The ability to pay a claim is what will differentiate one company from another. We need to be able to service our policies efficiently. We will launch health insurance plans in the second phase.
What need-based products would you look at in the future?
We would focus on wealth enhancement products such as single-premium policies that will help you invest a windfall gain and defined benefit riders that provide insurance to help a person live with impaired health.