ET Wealth
Stock Analysis, IPO, Mutual Funds, Bonds & More

People feel the need for term covers to protect lifestyles: Pankaj Razdan, Aditya Birla Sun Life Insurance

"The middle class lifestyle has changed and there is a need to protect that lifestyle. There is more awareness," says Pankaj Razdan.

, ET Bureau|
Sep 17, 2018, 06.30 AM IST
"10 years ago the principal use of a life insurance policy was to save for say a child’s wedding."
Customers are increasingly looking at pure risk term policies on the back of rising disposable incomes and growing awareness about insurance, Pankaj Razdan MD & CEO, Aditya Birla Sun Life Insurance and Deputy CEO, Aditya Birla Capital tells ET Wealth.

How have customer preferences evolved? Are you seeing an increase in demand for protection policies?
The middle class lifestyle has changed and there is a need to protect that lifestyle. There is more awareness. This was not the case 10 years ago when the principal use of a life insurance policy was to save for say a child’s wedding. People were satisfied with a money back policy that offered a lump sum after 20 years. Our consumption levels have increased – everyone wants to own a house at a younger age, an overseas holiday and a certain lifestyle that cannot change overnight if the breadwinner dies. So, what are the options available to protect this lifestyle? Nothing but a pure protection policy. Today, it is more relevant than before. Savings-oriented products are good too, but one cannot leave out the most important part—protection, the core objective of life insurance. Moreover, all stakeholders are working in tandem to create a sense of purpose around buying insurance. Low penetration means the potential for scaling up is high.

How have regulations helped?
After 2010, Ulips became cheaper and transparent, and the industry started doing well. When you make something good for customers, it’s going to yield positive results. For the industry, customer has become king and protection has become big.

What kind of changes in product regulations do you hope for?
More flexibility would help. The products should be easily acceptable, more outcome-oriented, rather than drawing a tight boundary and saying that you can do this and not do this. Today, our design approach is predictable—if you compare 29 products, they will be very similar. Overall broad guidelines and internal flexibilities can lead to more innovations that ultimately benefit customers.

What has been the impact of long-term capital gains tax on Ulips?
I wouldn’t say it is a big benefit for us or big draw down for mutual funds. There was talk for a few days, but at the end of the day these are two different industries. I don’t think the industry has used it as an instrument to get more money. Tax rules can come and go but that cannot be the basis for deciding where you will invest. Your goals should be the basis. For us, the big focus is protection. We ask our agents not to come back without informing customers about protection policies as otherwise you would be doing injustice.

Many life insurance companies, including yours, are launching critical ailment covers. Why should customers choose them over indemnity-based covers?
Term insurance can take care of the family if the breadwinner dies, but what if someone is alive but is unable to draw income? Diseases also eat into savings. That is the idea behind promoting these products. Ours are long-term products unlike critical illness policies from non-life insurers. You don’t have to keep worrying every year. You can buy a policy with a tenure of 5-10 years. Slowly, people have started warming up to the idea.

But why disease-specific covers?
A critical illness policy covers around 20 ailments, most which you will not contract. But two to three are killer diseases. Our research shows heart, cancer and renal diseases are the major killers. So we decided to price them separately.

The regulator wants products to be simpler. How are you doing that?
We have created an architecture where all products are simple. Our objective is to make sure that everyone – you, me, and the person on the street, understand the products. For example, in our cancer product, we say if you are diagnosed with stage 1 cancer, take 30% of the sum assured. At stage 2 or 4, you are entitled to say 70%. Nobody has to remember too many things. We are also not restricting products to geographies or income levels. When you do that the product design gets complicated.

What about riders? Has the awareness increased?
Unfortunately, people have not used riders in a big way.

What steps have you taken to check mis-selling?
The industry has done a good job over the last few years. The trust has come back. Mis-selling is a function of a number of things. How do you recruit distributors? How do you measure their performance? Purely on the basis of sales logged or how much profit they bring in? We measure the relationship quotient at each branch. We rate them on the basis of sales they make and mis-selling recorded. Compensation is based on quality, not just quantity. Technology throws up which product is suitable for you. When you do all these things, mis-selling will not happen.

How do you measure satisfaction?
An external agency’s study shows we have moved from rank 12 to three this year on customer loyalty. Our Net Promoter Score (NPS) has improved three times. More people are recommending us. Around three and a half years back, our 13th month persistency was in the late 50s. Now it’s at 75%. During the same period last year it was at 71%. So every year, persistency is increasing, more people are coming back to us.

Also Read

Fund houses woo clients with a free term cover

Mutual fund houses woo clients with a free term cover

Mutual fund houses woo clients with a free term cover

LIC Housing Finance loans to come with term cover

New vehicle owners have to buy long-term cover

Add Your Comments
Commenting feature is disabled in your country/region.

Other useful Links

Copyright © 2020 Bennett, Coleman & Co. Ltd. All rights reserved. For reprint rights: Times Syndication Service