There’s a shift in customer preference for guaranteed insurance products
3 min read 10 Mar 2021, 01:02 PM ISTAllowing life insurers to offer indemnity-based health products will lead to more product innovation, expansion of the market size, and subsequently increased coverage
PremiumNEW DELHI: A committee set up by the Insurance Regulatory and Development Authority of India (Irdai) recently recommended introducing index-linked insurance products (ILIPs).
In an interview with Mint, Deepak Kinger, chief risk and compliance officer at ICICI Prudential Life Insurance, said from a life insurer’s risk management perspective, ILIPs can be better managed compared with guaranteed products.
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Edited Excerpts:
When do you expect Irdai to allow life insurance companies to sell indemnity-based products?
The regulator had formed a committee to study the feasibility of permitting life insurers to offer indemnity-based health insurance products, and the report is awaited. Allowing life insurers to offer indemnity-based health products will lead to more product innovation, expansion of the market size, and subsequently increased penetration.
Given market volatility, we have seen a shift in customer preference towards guaranteed products. In such a scenario, ILIPs as a proposition becomes more relevant as the return on these products is linked to an index or benchmark. The committee in its report stated that these products could be an apt alternative or complementary option to the current conventional guaranteed products. Also, from a life insurer’s risk management perspective, index-linked products can be better managed compared with guaranteed products.
Has it become difficult for someone who got covid-19 to get a life cover?
All our existing products offer cover against covid-19. For the first nine-month period of this financial year, we settled covid-19 related health and death claims totaling ₹344 crore. Given that the impact of covid-19 on the health of an individual can significantly vary despite the lack of existing co-morbidities, this assessment has got included in processes on a risk-calibrated basis.
What are the key learnings that have you picked up from the covid-19 pandemic and how have you modified your risk mitigation strategy?
The pandemic has really highlighted the need for organizations to be dynamic, resilient and have a robust digital backbone to stay relevant. Post the spread of covid-19, there was a fear of a substantial increase in mortality and morbidity, and the potential impact of a larger economic shock due to the necessary lockdown. However, our covid-19 claims experience continues to in line with our liability provisions.
On the credit risk side, we have always been cautious in our assessment of investment opportunities. About 96.5% of our total fixed-income portfolio is invested in the highest credit-rated securities as of 31 December 2020. Besides, our prudent investment strategy has ensured that we have had zero non-performing assets (NPAs) across market cycles and over the last 20 years of our operation.
Our stress testing reflects the resilience of our solvency and the covid-19 experience has reiterated to us the importance of agility, resilience and continued investment in technology.
In insurance, it is assumed that those with better economic profiles have lower mortality rates. Has this understanding changed with this pandemic?
It has been observed that mortality rates vary by geographical locations, age, gender and social class. Occupation determines customer’s income or economic profile, which enables them to adopt a particular lifestyle. This can have both positive as well as negative implications, such as over-indulgence. Individuals with a better economic profile are likely to have better access to healthcare and are expected to be more aware of the components of a healthy lifestyle which lowers mortality rates. Our overall historical claims experience, as well as that of the industry, does indicate that those with better economic profiles have lower mortality. Specifically, on the loss of lives due to covid-19, as of today, there is insufficient data to conclude that individuals with better economic profiles have a lower mortality rate.
