A lot of insurance is savings. As much as 94% of the portfolio for life business is savings, which is traditional or unit-linked. Only 6% of the premium comes from pure protection, says Future Generali India Life Insurance MD & CEO Alok Rungta in an interview with Riju Mehta.
How is Future Generali’s recent tie-up with the Central Bank of India likely to impact business?
We are in the long-term business of managing customers’ money and a lot of business is done on trust. When a 100-year-old financial institution like the Central Bank comes to us and has a brand identity along with Future Generali, there will be a renewed trust among customers. This will have a positive impact on every aspect of business because we are mostly a retail-dominated player. Also, we have already agreed to a distribution relationship, which means we will have a bancassurance channel with the Central Bank. This will be a big change and positive swing for life business, especially as we don’t have a banca relationship of this scale and magnitude. It will change the face of the organisation in terms of the way we operate over a period of time.
Is agency channel still bigger than digital and insurtech platforms in terms of onboarding customers?
Today, agency is the biggest channel globally and this will remain true for India as well. The digitisation, or adoption of new technology and e-commerce, has only changed the way we interact with our distributors and customers. In lifestyle also, a very small fraction of business is online end-to-end. It is mostly assisted, not completely online. Whether it is assisted by a calling agent or a face-to-face agent, this is needed in our business. So, I believe, agency will remain for years to come.
How does Bima Sugam fit into this scenario?
It’s a very interesting idea and we’ll have to wait and watch how it unfolds. From an ideation perspective, the thought process is whether we can give access to people on a single platform with everybody present. Traditionally, insurance has been a push product, not a pull product. Most of us are trying to go behind a specific set of customers to drive sales through push mechanics. Bima Sugam’s concept is to give the choice to customers to come on board and choose a product or an organisation. It is an attempt to create a pull, rather than a push. So, it is both an attempt to create a marketplace, where the customer is completely empowered, and once the awareness is created, try to create a pull rather than provide a push. However, there is still some time before it sees the light of the day and then we will see how it unfolds in the real world.
Do you think it is a bold move because insurance has always been a push product and tax has acted as a big incentive. With the rolling back of tax incentives, will people come forward on their own or still need to be pushed?
You’re right and many people miss this point when they ask why people are not coming into the insurance fold. In the past few years, most of the tax benefits have been rolled back from the insurance category and it is becoming less competitive compared to other financial products. This fact has been reflected in numbers as well in the past two years as growth has been sluggish compared to what we thought it would be. This is just one factor and not the only reason. Inflation has not helped with disposable incomes and neither have the past few months in the capital markets. So there is a mixed bag of reasons, but this is certainly one of the bigger impact items.
One big concern that the industry has recognised, and you will see it unfolding in the future, is that there is still a lack of understanding and awareness. It could be higher in metros and tier 1 cities, even though it may not convert into action. After Covid, there has been more awareness about health and term, but there is resistance in the Indian frugal mind—why buy a product that doesn’t give something back. There is lot of work to be done in creating awareness. Secondly, with awareness, we need to create a price competitive regime. Affordability still remains a big concern in the Indian market as we go for the vision of insurance for all by 2047. So, awareness, with price competitiveness and ease of buying can make it work.
Given the move towards the new tax regime, how have the traditional plans been impacted vis-a-vis the term plans?
The past two years’ story has been high interest rate regime. The advantage that the product portfolio had was that we were able to offer high guarantees. This worked well because the customer was happy to buy if the IRRs were at least as attractive as the interest rates, and we are the only category where you can lock this IRR (internal rate of return) for 20, 40 years. There is no other product category where you can get this kind of lock-in period. That is why this category worked very well.
The downside is that term insurance was taking a backseat because the customer was happy to look at guaranteed products. Now, with the softening interest rate regime and awareness drives across general and life insurance, the category is expected to gain visibility and momentum.
There will be resonance among people to buy a term plan and see it as a protection instrument, rather than looking at insurance only as a saving instrument. The protection story sometimes gets muffled by the saving story.
Are you providing the same push for both term and traditional plans?
We recently launched a product, which is one of the most competitive term plans. Term is a consumption product in my view and it has to be affordable and accessible. One of our focus areas is how to bring term to a better mix; maybe in single digit, not double digit, but a higher single digit from where we stand.
To promote the category we have also launched a lot of riders recently, which can be attached to saving and unit-linked products. So there is a clear drive and push to look at the way we can sell standalone protection or along with saving products to meet the need of protection as a bundle. Frankly speaking, when you bundle, you can offer a great solution to, say, a father who wants to ensure that the education fund is intact for his kids even if something happens to him. This is a saving-cum-protection combination. You can also secure your retirement to a large extent. So there is a lot of risk protection and saving multiplier if you take a combination, and the solutions work very well.
In our country, you may be a graduate, but financial literacy is not very high. Irrespective of the line of education, every individual should have financial literacy.
One of the advantages with banks is that they run financial inclusion programs and we want to participate with them, especially in tier 3 and tier 4 cities, and we want to bring the protection element along. Creating awareness at a larger level is not going to be an overnight job. You don’t need a black swan event like Covid for people to start appreciating it because by the time you appreciate it your real time has gone.
Insurers are aligning themselves with Irdai’s vision of insurance for all by 2047, but does increase in penetration translate to adequacy of insurance?
If penetration is needed, there is definitely under-insurance. I will go back to my point about the need for financial literacy for people to appreciate and understand how much insurance is accurate. I don’t believe in over-insurance, but there is an accurate cover which everyone must take.
A lot of insurance is savings. As much as 94% of the portfolio for life business is savings, which is traditional or unit-linked. Only 6% of the premium comes from pure protection. As a country and as a category, there’s a lot of work to be done to cover people for real protection. Even among the covered, there is under-insurance. So there’s an opportunity even there. As you get new customers, there’s a need to cover the existing ones too.
Has there been a shift in your portfolio with respect to saving and protection plans in the past few years?
Though it has not changed drastically, we’ve found green shoots. After Covid, the prices rationalised and there is clearly a drive for term that is much more than ever in the past, but it’s definitely not enough. For us, the premium for protection in the past year has been around 1%. The market is at 6% and we are at 1%, which is why we want to bring it at least to the market level. That’s why we reworked our product to make it competitive when we got the feedback that there was a demand for it. Now, we have one of the cheapest term plans in the market. After that, we saw some uptick in term, but we need to go from 1% to 5%.
Insurers are coming up with life-health combo products and Bima Vistaar is also set to launch. What’s your take on this? Are you coming up with such a product of your own?
I have a different view on this. There are some natural combinations and some combinations can be created. For instance, health insurance has a big demand in the 40-plus age group, and it is also the age when people start looking at retirement planning. Or, when you are looking at health, you are also worried about critical illness. So, there are some sweet spots of combinations which make a lot of sense because these are natural allies.
The only challenge is not about selling, but the fact that a life business claims management experience is different from a general insurance business, which is different from a health insurance business. At the point of sale you can do a lot in terms of opting for a combined offer, but you need to understand what it takes to serve that category of customer. While there are a lot of possibilities and opportunities, one has to be sure it’s not only about sales, but also about customer experience and servicing. Since we have been allowed to come up with combo products, we are looking at it and have a general insurance/health product. It’s not concrete so far, but I have some ideas and we’ll see how to take it forward.
How are you planning to integrate AI in business or have you done it already?
Our AI journey started a year ago and today we have two identified partners. One is a voice-only partner and the other with AI agents. We had a lot of training for the management team and others to understand what we were dealing with. We have identified 32 business cases, which are in the pipeline, and eight are in the roll-out stage; some this month, some next month. So we are into this in a big way and it is happening in three areas. One, we want to see how to use AI at the point of sale to increase productivity. Two, how to use it in technical areas like underwriting and claims and, three, use it to increase efficiency and reduce the turnaround time across processes in the organisation.
How can misselling be reduced? There is a lot of false narrative about misselling.
If you look at data, not even 1% of sold policies have complaints. The complaint data doesn’t tell us that it is out of control, but having said that, there is a lot of noise about misselling.
The approach we have taken is that the selling process will be differentiated from what we generally see. We have been working to identify, on the retail side, the customer categories that the bank has. We have built a platform, where we are going to have a process of going through and understanding customers, capturing their needs and asking them to prioritise these needs. Only then we’ll have any discussion on offers or solutions.
This automatically covers the concept of misselling because in the process we will enlighten the customers, make them aware of risks, give price comparisons and deploy the AI tool. This is a process we are keen to follow on a day-to-day basis.
RAPID FIRE
Q. If you could alter your career choice, what would it be?
I would have become a doctor.
Q. If you could be Irdai chief for a day, what insurance change would you make for senior citizens?
I would like to give them an insurance cover that is discounted or free of cost.
Q. If you could go back to pre-pandemic days, what change would you make in your insurance and investment portfolio?
In insurance, I would increase the health cover for myself and my family. On the investment side, I would make my portfolio more diversified.
Q. A good book you would recommend...
The Leadership Pipeline by Ram Charan.
Q. Which insurance policies do you currently have?
Term plans, ulips, pension plans and traditional insurance policies.
How is Future Generali’s recent tie-up with the Central Bank of India likely to impact business?
We are in the long-term business of managing customers’ money and a lot of business is done on trust. When a 100-year-old financial institution like the Central Bank comes to us and has a brand identity along with Future Generali, there will be a renewed trust among customers. This will have a positive impact on every aspect of business because we are mostly a retail-dominated player. Also, we have already agreed to a distribution relationship, which means we will have a bancassurance channel with the Central Bank. This will be a big change and positive swing for life business, especially as we don’t have a banca relationship of this scale and magnitude. It will change the face of the organisation in terms of the way we operate over a period of time.
Is agency channel still bigger than digital and insurtech platforms in terms of onboarding customers?
Today, agency is the biggest channel globally and this will remain true for India as well. The digitisation, or adoption of new technology and e-commerce, has only changed the way we interact with our distributors and customers. In lifestyle also, a very small fraction of business is online end-to-end. It is mostly assisted, not completely online. Whether it is assisted by a calling agent or a face-to-face agent, this is needed in our business. So, I believe, agency will remain for years to come.
How does Bima Sugam fit into this scenario?
It’s a very interesting idea and we’ll have to wait and watch how it unfolds. From an ideation perspective, the thought process is whether we can give access to people on a single platform with everybody present. Traditionally, insurance has been a push product, not a pull product. Most of us are trying to go behind a specific set of customers to drive sales through push mechanics. Bima Sugam’s concept is to give the choice to customers to come on board and choose a product or an organisation. It is an attempt to create a pull, rather than a push. So, it is both an attempt to create a marketplace, where the customer is completely empowered, and once the awareness is created, try to create a pull rather than provide a push. However, there is still some time before it sees the light of the day and then we will see how it unfolds in the real world.
Do you think it is a bold move because insurance has always been a push product and tax has acted as a big incentive. With the rolling back of tax incentives, will people come forward on their own or still need to be pushed?
You’re right and many people miss this point when they ask why people are not coming into the insurance fold. In the past few years, most of the tax benefits have been rolled back from the insurance category and it is becoming less competitive compared to other financial products. This fact has been reflected in numbers as well in the past two years as growth has been sluggish compared to what we thought it would be. This is just one factor and not the only reason. Inflation has not helped with disposable incomes and neither have the past few months in the capital markets. So there is a mixed bag of reasons, but this is certainly one of the bigger impact items.
One big concern that the industry has recognised, and you will see it unfolding in the future, is that there is still a lack of understanding and awareness. It could be higher in metros and tier 1 cities, even though it may not convert into action. After Covid, there has been more awareness about health and term, but there is resistance in the Indian frugal mind—why buy a product that doesn’t give something back. There is lot of work to be done in creating awareness. Secondly, with awareness, we need to create a price competitive regime. Affordability still remains a big concern in the Indian market as we go for the vision of insurance for all by 2047. So, awareness, with price competitiveness and ease of buying can make it work.
Given the move towards the new tax regime, how have the traditional plans been impacted vis-a-vis the term plans?
The past two years’ story has been high interest rate regime. The advantage that the product portfolio had was that we were able to offer high guarantees. This worked well because the customer was happy to buy if the IRRs were at least as attractive as the interest rates, and we are the only category where you can lock this IRR (internal rate of return) for 20, 40 years. There is no other product category where you can get this kind of lock-in period. That is why this category worked very well.
The downside is that term insurance was taking a backseat because the customer was happy to look at guaranteed products. Now, with the softening interest rate regime and awareness drives across general and life insurance, the category is expected to gain visibility and momentum.
There will be resonance among people to buy a term plan and see it as a protection instrument, rather than looking at insurance only as a saving instrument. The protection story sometimes gets muffled by the saving story.
Are you providing the same push for both term and traditional plans?
We recently launched a product, which is one of the most competitive term plans. Term is a consumption product in my view and it has to be affordable and accessible. One of our focus areas is how to bring term to a better mix; maybe in single digit, not double digit, but a higher single digit from where we stand.
To promote the category we have also launched a lot of riders recently, which can be attached to saving and unit-linked products. So there is a clear drive and push to look at the way we can sell standalone protection or along with saving products to meet the need of protection as a bundle. Frankly speaking, when you bundle, you can offer a great solution to, say, a father who wants to ensure that the education fund is intact for his kids even if something happens to him. This is a saving-cum-protection combination. You can also secure your retirement to a large extent. So there is a lot of risk protection and saving multiplier if you take a combination, and the solutions work very well.
In our country, you may be a graduate, but financial literacy is not very high. Irrespective of the line of education, every individual should have financial literacy.
One of the advantages with banks is that they run financial inclusion programs and we want to participate with them, especially in tier 3 and tier 4 cities, and we want to bring the protection element along. Creating awareness at a larger level is not going to be an overnight job. You don’t need a black swan event like Covid for people to start appreciating it because by the time you appreciate it your real time has gone.
Insurers are aligning themselves with Irdai’s vision of insurance for all by 2047, but does increase in penetration translate to adequacy of insurance?
If penetration is needed, there is definitely under-insurance. I will go back to my point about the need for financial literacy for people to appreciate and understand how much insurance is accurate. I don’t believe in over-insurance, but there is an accurate cover which everyone must take.
A lot of insurance is savings. As much as 94% of the portfolio for life business is savings, which is traditional or unit-linked. Only 6% of the premium comes from pure protection. As a country and as a category, there’s a lot of work to be done to cover people for real protection. Even among the covered, there is under-insurance. So there’s an opportunity even there. As you get new customers, there’s a need to cover the existing ones too.
Has there been a shift in your portfolio with respect to saving and protection plans in the past few years?
Though it has not changed drastically, we’ve found green shoots. After Covid, the prices rationalised and there is clearly a drive for term that is much more than ever in the past, but it’s definitely not enough. For us, the premium for protection in the past year has been around 1%. The market is at 6% and we are at 1%, which is why we want to bring it at least to the market level. That’s why we reworked our product to make it competitive when we got the feedback that there was a demand for it. Now, we have one of the cheapest term plans in the market. After that, we saw some uptick in term, but we need to go from 1% to 5%.
Insurers are coming up with life-health combo products and Bima Vistaar is also set to launch. What’s your take on this? Are you coming up with such a product of your own?
I have a different view on this. There are some natural combinations and some combinations can be created. For instance, health insurance has a big demand in the 40-plus age group, and it is also the age when people start looking at retirement planning. Or, when you are looking at health, you are also worried about critical illness. So, there are some sweet spots of combinations which make a lot of sense because these are natural allies.
The only challenge is not about selling, but the fact that a life business claims management experience is different from a general insurance business, which is different from a health insurance business. At the point of sale you can do a lot in terms of opting for a combined offer, but you need to understand what it takes to serve that category of customer. While there are a lot of possibilities and opportunities, one has to be sure it’s not only about sales, but also about customer experience and servicing. Since we have been allowed to come up with combo products, we are looking at it and have a general insurance/health product. It’s not concrete so far, but I have some ideas and we’ll see how to take it forward.
How are you planning to integrate AI in business or have you done it already?
Our AI journey started a year ago and today we have two identified partners. One is a voice-only partner and the other with AI agents. We had a lot of training for the management team and others to understand what we were dealing with. We have identified 32 business cases, which are in the pipeline, and eight are in the roll-out stage; some this month, some next month. So we are into this in a big way and it is happening in three areas. One, we want to see how to use AI at the point of sale to increase productivity. Two, how to use it in technical areas like underwriting and claims and, three, use it to increase efficiency and reduce the turnaround time across processes in the organisation.
How can misselling be reduced? There is a lot of false narrative about misselling.
If you look at data, not even 1% of sold policies have complaints. The complaint data doesn’t tell us that it is out of control, but having said that, there is a lot of noise about misselling.
The approach we have taken is that the selling process will be differentiated from what we generally see. We have been working to identify, on the retail side, the customer categories that the bank has. We have built a platform, where we are going to have a process of going through and understanding customers, capturing their needs and asking them to prioritise these needs. Only then we’ll have any discussion on offers or solutions.
This automatically covers the concept of misselling because in the process we will enlighten the customers, make them aware of risks, give price comparisons and deploy the AI tool. This is a process we are keen to follow on a day-to-day basis.
RAPID FIRE
Q. If you could alter your career choice, what would it be?
I would have become a doctor.
Q. If you could be Irdai chief for a day, what insurance change would you make for senior citizens?
I would like to give them an insurance cover that is discounted or free of cost.
Q. If you could go back to pre-pandemic days, what change would you make in your insurance and investment portfolio?
In insurance, I would increase the health cover for myself and my family. On the investment side, I would make my portfolio more diversified.
Q. A good book you would recommend...
The Leadership Pipeline by Ram Charan.
Q. Which insurance policies do you currently have?
Term plans, ulips, pension plans and traditional insurance policies.
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