Malay Ghosh, Executive Director and President, Reliance Life Insurance Company Ltd talks about the changes in the life insurance sector and predicts that the industry will grow by 10-15% this year
How do you see the life insurance industry growing?
At this point of time, life insurance industry is not showing growth compared to previous year. But it is growing on a month-on-month basis.
The drop in growth has been due to changes in product features. Currently, the life insurance companies are focusing more on protection than investment. Till last year, we were selling a different basket of products and now we are exposed to another basket of products. Insurers are now busy training agents according to the new regulations.
I expect, by the end of the fiscal, the industry will come back to its growth phase and report a growth of 10 percent to 15 percent.
Earlier ULIP was a major product. After the new IRDA regulations, which products are insurers emphasising more?
For ten years, there was a bull market phase in India and insurers mainly focused on ‘growing your money along with insurance’. Making money grow became a motivation for everyone rather than securing life.
This emphasis on investment changed with the dip in the market during 2007-08 and the regulatory changes announced by IRDA last year. Currently, insurance companies are featuring their products as protection and savings are add-on feature and not the major feature.
The individual non single premium has drastically come down from FY11 to FY 10 year basis. What is the reason for the same?
Last year, April to August was highly productive. Normally, the life insurance sector follows a cycle where the first quarter shows lowest growth and the graph moves higher as it approaches the fourth quarter. So during the fourth quarter, all life insurance companies report highest growth but this cycle was not followed last year.
Normally, insurance companies report 8 percent to 10 percent of the total yearly performance during the first quarter. Last year, we reported 25 percent of the yearly growth during the first quarter and we did that business between March and July. For the whole year, we did a business of Rs. 3000 crore. Majority of the business happened during the first half which is not normal.
We expect this year to be a normal year as the sector is growing month-on-month basis.
According to an IRDA report, 15 lakh agents have left the industry because of the commissions being drastically reduced. How are you handling this issue?
In our company we have not seen a drastic change in the number of agents who were productive this year from last year. This is because of our focus on traditional products rather than ULIP.
Due to the change in ULIP guidelines, distribution commission have come down, average premium have gone up and the lock-in period has also increased to five years. These changes have led to increase in attrition rates. However, the number of agents getting recruited per month has also gone down.
Currently, we are recruiting four to five thousand agents every month but it needs to increase as we have a target of recruiting a lakh by the end of the fiscal.
Which insurance products appeal to different segments of the Indian population?
Majority of clients in this sector are new clients. They are not very aware about the product features. People usually buy for savings and look for protection. Customers who take a home loan feel that it is compulsory to take insurance for safety. Youngsters are very aware about the products and they usually prefer term insurance. So, there is a mix of customers with different needs.