Insurance industry gathered momentum with post-demonetisation savings. Some insurers, in fact, came out with initial public offerings (IPOs) during the last financial year.Deepak Mittal, MD and CEO, Edelweiss Tokio Life Insurance, shares his views on the prospects for the sector during the new financial year.
What is the outlook for the insurance sector in the new financial year?
Over the last three years, the life insurance industry has exhibited a positive trajectory. The industry will likely end FY18 with about 20% growth in new business premium over the last year. This growth was driven by post-demonetisation savings flow, a stellar performance in the equity markets and an expanding distribution footprint.
The industry will sustain the robust growth rate in the new financial year too. In the coming years, the industry at large will make concentrated efforts and investment towards identifying new distribution avenues as well as strengthening the existing ones.
The smaller towns, which are largely underpenetrated, will in part drive the industry growth.
Insurers will push the envelope in product innovation to cater to the different demands of these customers. An enhanced technology adoption will also support the growth. Better technology adoption will help us reach out to more and diversified customers at much faster pace, thereby making us more nimble-footed.
Do you see any consolidation happening in the sector?
In this year, the sector was abuzz with initial public offerings (IPOs), led by the issues of three largest private sector life insurers. In the coming year, the sector might take a pause on the IPO front on account of global macro uncertainty and upcoming elections in India.
However, we may see either private equity investments into the sector or mergers. Some of the bank-led insurance companies have already announced their intentions in this regard. Based on the response these companies garner, we might see more players follow suit.
Your take on unit linked insurance plans (ULIPs) ?
ULIP is the most misunderstood product currently. Over the past several years, the product has undergone a massive change spread over four phases.
In the first phase up to 2010, undeniably there were certain shortcomings in the product offering. After 2010, a regulatory shake-up made ULIPs much more sophisticated, ideal for customer consumption, and at par with other investment choices.
We now have [the] fourth generation (4G) ULIPs which are customer-friendly, making them one of the most competitive investment options for flexibility, costs, performance and tax.
Case in point is our recently launched ULIP product - Edelweiss Tokio Life Wealth Plus - [that] provides additional allocation to the customer’s investment funds from day 1.
So, instead of worrying about allocation charges, you actually have additional units from day 1. This feature is delightful for the customer as he sees his money grow from the initial period and enjoys even higher addition rates (as high as 7% of the premium paid in the later years) as the policy progresses.
In addition, the product also offers investment flexibilities, tax efficient asset allocations and access to highly-rated funds to cater to different customer needs. However, the first generation ULIPs still occupy the customer’s mind space and we need to educate the customer to rectify this perception. Let me use an analogy of telecom space – while the world has moved to 4G, the customer is still perceiving the product for its first generation or 2G features, which we have left behind years ago.
What is Edelweiss Tokio Life Insurance’s business strategy for the new financial year?
We have achieved a robust growth this year and our aim is to repeat a growth of over 50% based on our existing distribution presence. We will explore new distribution partners, including bancassurance opportunities.
Customer centricity both through product and service innovations will remain our primary focus and we will invest in technology and digital platform to ensure that we stay on this path.
How do you plan to expand into tier 2 and 3 cities?
We are consciously moving towards including semi-urban and rural towns in our distribution footprint. From a predominant urban presence, we now get nearly half of our business from the smaller towns.
We believe that the next phase of growth will come from tier 2 and 3 cities, which is why our expansion efforts will be concentrated in these cities.
In fact, our online business has been an important channel in expanding our reach to a wider range of cities. We have seen heartening traction on this channel; we had sold our online products across 100 cities in India in just one year.
What is the prime differentiator you are trying to create for Edelweiss Tokio Life Insurance?
Our values of customer centricity and product innovation are what sets us apart.
We have a proprietary need analysis tool called Vijaypath, which makes it simple for the customers to understand their goals and identify the product they need. The approach of [the] need-based selling is helping us gain trust of our customers and it helps us differentiate from others. We want to grow by putting the customers and their needs first. Product innovation, of course, is a natural outcome of our focus on customer centricity. It is a continuous journey which helps us collect customer insights, and engineer products that will appeal to the target audience.
