The life insurance industry has reasons to rejoice. While the country's burgeoning equity markets have fuelled the sales of unit-linked insurance plans (ULIPs), falling term deposit rates also indicate strong future growth. Traditional products also continue to be popular among the masses on account of guarantees offered under the falling interest rate regime. Ashish Vohra, Executive Director and CEO at Reliance Nippon Life Insurance Company (RNLIC), tells Teena Jain Kaushal how the industry and the company grew in the year gone by and what to expect in 2018. Edited excerpts:
Q: How was the last calendar year for the industry and the company?
A: In the first half of FY2017/18 (April-September, 2017), the life insurance industry witnessed 25 per cent growth in individual business, fuelled by the increase in ULIP sales on account of stock market buoyancy. We also worked on customer stickiness and driving up persistency, reflected in the positive movement in the 13th-month persistency ratio. In fact, several players saw an average increase of 3-4 per cent in the first half of the current fiscal. Another significant trend was two more insurers got listed.
At RNLIC, we pursued a multipronged agenda to make it a sustainable, profitable business and reported 12 per cent growth in our individual weighted received premium during the first half. Our 13th-month persistency saw a significant jump of 7 per cent in absolute terms - from 61 per cent in H1 2016/17 to 68 per cent in H1 2017/18. We aim to exceed 70 per cent by the end of this fiscal. Our renewal collections during the above period moved up from Rs1,213 crore to Rs1,283 crore, placing our assets under management at around Rs18,000 crore.
Q: What do you expect in (CY) 2018?
A: With the rise in customer awareness, everybody is extremely keen to get an insurance product that will fit his/her requirements. Hence, protection and health plans are gaining momentum. These will further accelerate the industry's overall growth in the country. Persistency and customer service will continue to be the focus, along with building sales and operational efficiencies for optimum expense management.
In sync with today's demand, RNLIC is actively building on its digital platform. We have launched a mobile app called Super Express that ensures end-to-end, on-field policy issuance in less than 20 minutes. It also comes with an inbuilt customer understanding verification feature that reminds and prompts buyers to validate their understanding of the policy they are about to purchase. This feature covers five key points, including a clear comprehension of the product, payment terms and the extent of guarantee - factors that had often led to misunderstanding and grievance in the past.
Moreover, we are the only company with a direct-selling channel operated by women. We currently run 110 women-only branches and will continue to expand this channel in 2018.
Q: The deadline to link life insurance policies with Aadhaar has been extended. Will it affect the claims process if the linking is not done?
A: As per the revised guidelines, it is mandatory to link Aadhaar number to one's insurance policies. No payouts or claims settlement can be done without it. The deadline for existing customers has been extended to March 31, 2018. So, it is advisable to complete the procedure within that time frame for uninterrupted payments and benefits.
Q: Why do you focus on guaranteed plans although they offer low returns?
A: Two key factors drive the need for guaranteed plans. First, we have a large reach in tier 3 and tier 4 cities, and a big part of that customer base prefers 'no uncertainty' products. For them, the value lies in the rate of returns and guaranteed cash flow for, say, a 20-year period irrespective of market interest rate fluctuations. Guarantees have a high take-up rate in many parts of the world for the long-duration comfort these products offer.
Then there are falling term deposit rates. Given that the bulk of life insurance is savings plans, they end up competing with other financial instruments. The most popular alternative is fixed deposit, but over the past three years, the yield has come down from around 9 per cent to 6.5 per cent. Our guarantee rates have not seen such steep reduction and provide a favourable trade-off, especially when you consider the tax benefit on returns and the inbuilt protection component of a life insurance policy.
Q: What is your view on new-age ULIPs?
A: Compared to their earlier avatar, new-age ULIPs cost less and hence, are more efficient. But one should remember that ULIPs are investments in the equity market, and the returns depend on market performance. The growth of the market benefits the fund value and, therefore, customer returns directly. But in times of market fall, there is also the downside. Customers must understand this equation when they invest in ULIP or any other market-linked insurance policy.
Q: Has the company reached break-even? When do you plan to get listed?
A: We have a strong profitability enhancement agenda carried out through all the drivers - margins, cost efficiencies, persistency, renewal collections, digital embedding and more. We have made significant progress in each and brought down the losses from Rs200 crore in 2015/16 to Rs60 crore in 2016/17. And we are on a steady track to break even in the current fiscal.
We do not plan to list in the near future, but we will keep the market posted as and when we plan it.
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