PremiumMUMBAI: While looking at the life insurance industry over the past 10 years, sectoral trends show decreasing complaints and policy surrenders, better persistency and claim ratios. Moreover, amid the covid-19 pandemic, the industry has also witnessed sustainable growth in the last two years.
In an interview with Mint, G Murlidhar, non-executive director, Kotak Life and Kotak General Insurance said the industry has witnessed a major shift from product centricity to customer-centricity. And, to deliver more value to customers; new distribution channels are being created, product designs are made more contemporary, and the processes are becoming quicker and customer friendly.
How is the insurance industry driving economic growth?
With more than 3 lakh employees, 2.5 million entrepreneurs and 44 lakh crore AUM (assets under management), the life insurance industry of today is a major driver of economic growth and surely plays a strong role in nation-building.
Besides, there is a huge digitisation thrust which means newer ways of doing business and effective channels to reach customers directly. In the digital era, expansion is in terms of augmenting reach and capabilities through digital assets and tools. This is likely to attract talent in the areas of analytics, product design, customer engagements and new segments of distributors. Having said that, we do expect hiring to continue in the frontline sales roles.
Given the rising cases in the second wave of coronavirus, where do you see the life insurance industry in FY22?
The impact of the second wave of covid needs to be studied over time. However, we expect that this time around, the industry has learned from the last year when the way of doing business underwent a significant change; based on these learnings the industry should be able to adapt and grow. Expectations of improved economic growth, more awareness about insurance and digitisation will sustain the demand. With this, and given the relatively low base, we expect around 10% growth in the industry in FY22.
Has there been a financial burden on the life insurance companies over rising deaths of the policyholders and subsequent premature claim settlements?
The Life Insurance industry has seen an increase in covid claims over the last financial year resulting from the loss of lives of some of the policyholders from covid. However, insurers had made reasonable provisions for additional claims expected during the pandemic. Further, valuation actuaries in insurance companies hold margins for prudence in their reserves for any mortality fluctuations. It is expected that the explicit covid provisions along with margins in the provisions should be sufficient to bear the additional claims burden. Insurers who are well capitalised have a strong solvency ratio to meet any mortality-related stress.
What role does the ‘conservation ratio, surrender retention, complaints ratio’ together play in deciding the purchase of a life insurance policy?
The conservation ratio, surrender or complaints ratio indicates the quality of business. Life insurance is a long-term business where such long-term quality parameters become important. Higher conservation an lower surrender/complaints ratio indicates that the advice given to customers at the time of buying the policy was sound, as well as customers, trust the long-term products and services offered by the insurer and are interested to keep their policies active by periodically renewing them. This is published information and customers ideally can have a look at this at the time of buying a policy. Besides, over the past 10 years, the industry trends have shown decreasing complaints and policy surrenders, better persistency and claim ratios.
