Focus on providing life insurance to the self-employed and low-salaried: Satishwar B. of Aegon Life

Through the Covid-19 pandemic, the life insurance industry experienced both tremendous challenges and unexpected opportunities. Satishwar B., MD & CEO, Aegon Life Insurance, in an interview with Teena Jain Kaushal of Business Today, talks about how the industry has shaped up post Covid-19, including increased public awareness around life insurance, sudden spikes in demand, and changes in pricing practices. He also talks about challenges, planned product launches, and future growth drivers.  

BT: How have the company and industry been doing post Covid-19?    

SB: Life insurers were struggling to create awareness about the need for life insurance. Covid-19 did the job. That was the only silver lining of the pandemic. We suddenly also saw a spike in demand. If we had increased the price then, it wouldn’t really work, it would have become an ‘anti-solution’. So things slowed down a bit at that point. Demand was high, and we were struggling because reinsurers had also increased their rate all of a sudden because of Covid-19. 

However, the increase in premium rates should not be seen as a post-Covid phenomenon. Reinsurers have consistently demanded an increase in premium rates. It just seems to have coincided with Covid. Term life insurance charges in India are one of the lowest—lower than most developed countries, with better health facilities and, hence, the higher premiums. So the demand to increase rates from re-insurers goes back to 2018. Covid is a one-time blip that acted as a catalyst. 

Besides this, over the past 18 years, we have been able to collect better data in terms of the actual mortality rate in the country, across various profiles. The price that you now have is a much more evolved and should continue.   

BT: Premium rates have already risen because of revisions by reinsurers. Will it remain stable for the next couple of years?   

SB: I don’t see the chances of it going down to pre-Covid rates. When you say stable, it won’t remain the same either. The increments will be more or less to factor in inflation, etc.   

Interestingly, at Aegon Life, we have been able to keep our rates in check. Our rates from 2008, all the way to 2020, saw a rise of just 5%. We launched seven versions of our flagship term product, iTerm. The first version we launched in 2008 was relaunched with reduced prices in 2012-13. And if I compare the prices in 2008 and 2019, the difference is only 5%.    

BT: How’s your portfolio mix currently?   

SB: Our insurance portfolio shows a diverse mix, categorised by different types of policies. We can analyse it in two primary ways: based on assets under management (AUM) and the number of policies (NOP). 

In terms of AUM, unit-linked insurance plans (ULIPs) constitute around 25%, non-participating (Non-Par) policies make up around 40%, with the AUM for these policies ranging between Rs 1,600 to Rs 1,700 crore and participating policies account for the remaining 35%. 

When we consider the number of policies, around 70% are non-par policies with term policies making up about 90% of these. The remaining 25-30% of policies are mix of ULIPs and participating policies. It’s important to note that although term policies form a large part of our NOPs, they contribute less to the AUM. This is because term policies typically have smaller ticket sizes—for example, a policy covering Rs 1 crore might only bring in Rs 10,000 annually.  

BT: What are some of the challenges for the industry right now?   

SB: The biggest challenge is awareness. People know about life insurance, but awareness in terms of the urgency and necessity of buying an insurance policy is lacking. Covid-19 sparked the urgency to buy life insurance, but it has diminished now. However, for health, that awareness and urgency has sustained post-Covid.  

BT: IRDAI talked about the composite licence. What is your view on it?   

SB: Whenever it happens, it will arouse a lot of interest across the life insurance industry. However, it will involve much discussion at the shareholder level as it is a business decision requiring capital. It is a big decision to sell health and life together. If there is a composite licence, we would be inclined to take up health insurance, too, because health and life go hand in hand.  

We already provide fixed benefit policies in the form of critical illness riders that one can add to their life insurance policies. If the composite license proposal comes through, we can provide indemnity policies. Both fixed benefit and indemnity policies complement each other.  

BT: What new markets do you plan to tap? What new products do you have in the pipeline?   

SB: Over the years, the life insurance industry has primarily been focused on the salaried class. They had a regular stream of income. We realised that an individual’s health and longevity depended greatly on his/her standard of living. And a salaried individual had a better standard of living because of a steady income.

However, now things have changed. A new segment of Indian customers is emerging. Most of the people in this segment are self-employed or low-salaried. However, they are digitally savvy and are actively transacting online. But they are devoid of any life insurance cover because of the tonnes of paperwork involved. 

At Aegon Life, we decided to reach out to this segment and craft products specifically for them. We designed a simple buying journey, which requires zero documentation. Using digital underwriting, we check the eligibility of the insurance applicants using alternate methods where they do not have to upload any documents. We can gauge the customer’s affluence using alternate methods such as their mobile number connected to their bank account; or their PAN which helps us verify their income through their ITR statements. This has worked well for the lower-income groups, where people are looking for a sum assured between Rs 5 lakh to Rs 50 lakh.   

We designed our new term plan—the Akhil Bharat Term Plan—which offers a sum assured of Rs 50,000 to Rs 5 lakh. An applicant just has to scan a QR code on their phone, enter their Aadhaar number, answer a few basic questions, and record a 15-second selfie video for health verification. After this, we are able to issue the policy instantly.  It is very similar to the way Digi Yatra works.   

We are looking at launching this plan in Andhra Pradesh since that is the state we have been assigned to by the regulator for bridging the insurance gap.    

Besides this, we will also be launching our new savings insurance plan and a ULIP product for other customer segments.  

What factors do you feel are driving the growth of your company?   

The one big change which has happened for us is we are getting a new shareholder. And the shareholder will play a critical role in bancassurance distribution. We have been able to establish ourselves as a digital life insurance company that has pioneered the online term plan. We’ll continue to build these kinds of products, test them out, and ease out the buying journey as much as possible. Reach is not a challenge for us—we can reach wherever the JAM trinity has made inroads online. 

Plus, we are forging partnerships with insurtech, edtech, healthtech and e-commerce companies for better distribution. Our plug-and-play tech stack is so flexible that it can adapt to any platform and is ready to market any product after 10-15 days of testing.

 

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