On distribution network.
In the first few years of the business, we focussed on making sure that we had the right products for retail consumers, the right technology, getting our branding right, and managing the challenges of distribution. In the last two years, we have increased our focus on distribution and increased our presence in close to 1,500 different locations. We have also increased our rural focus where the challenges are different and the needs smaller.
On market-linked products.
We have got most of the portfolio products right. We recently introduced a Life Stage product, which has done well. Typically, retail consumers buy when the markets are high and sell when the markets are low. Since life insurance is a long-term product and, therefore, the investment follows a long-term approach, it makes sense for the investors to follow an asset allocation strategy, and not try and time the market. It provides an optimal asset allocation strategy for the consumer.
On healthcare plans.
A lot of product innovation in the last two years has been in our health portfolio. We focussed on this segment after detariffing took place in January 2007. Now, we have nine different standalone healthcare plans for the consumer. Our products are centred around three key areas: a reimbursement plan, a benefits plan that supports hospitalisation and other costs, and a diseases-specific plan that targets various diseases. Since we went into health as a big new initiative, we invested in right systems and technologies to support a smooth rollout.
On the growth in different products.
Pensions as a category is growing faster than life, our other segment, and it will continue to grow at a marginally faster pace. The health category is obviously growing the fastest because of the smaller base.
On tax benefits for long-term savings.
Most countries provide a taxadvantage to long-term investment products. All the tax-advantage in India is bundled under one section of the IT Act, Section 80C. There is no specific advantage for long-term savings. We believe that if you really want to promote long-term investments in infrastructure, then it’s important to distinguish between long-term and short-term savings.
On the need for savings plans.
Insurance worldwide has both long-term savings and insurance, and to say that life insurance companies provide only protection is not correct. In the UK, 99 per cent of life insurance premiums are savings products, while less than 1 per cent is protection. Another fallacy that people talk about is that life insurance in India was focussed on protection earlier but now, has turned to savings products. But in the preliberalisation era, only 1 per cent of the business came from term insurance, and even now there’s no change in that number.
On the efficiency of ULIPs.
When the markets were delivering 25-30 per cent returns, we found that investors break even on their ULIP cost in three years compared to a mutual fund investment. This is because, while the upfront load is higher, the asset management charge is lower. Even if you project a 10 per cent return, an investor breaks even in about seven years for most of our products.