News: ‘Only 20% of the total insurable population of India is covered’

The insurance industry is in the limelight on account of innovative products being offered to people who want risk coverage as well as savings. Trevor Bull, MD, Tata AIG, spoke to Teena Jain of The Financial Express on various issues related to the insurance business in India. Excerpts:

India is an under-insured country. How are you planning to increase your base here?

The private insurance industry in India is still at a nascent stage and growing. To date, only approximately 20% of the total insurable population of India is covered under various life insurance schemes.

Given this, we have diligently worked towards educating the masses about life insurance and its relevance. We firmly believe that reaching out to people and educating them about the need for insurance will bear fruits in the long run. Our philosophy is to anticipate the needs of people and introduce innovative products and services to meet these needs. We also have many accolades to our name in terms of product innovation, servicing efficiency and training of our channel partners. We aim to build on the expertise of the partners to the joint venture, strengthen our distribution network and leverage our understanding of the Indian insurance landscape to provide need-based and innovative insurance solutions to the Indian masses.

Are the traditional plans fading away with ULIPs giving you benefits of both insurance and savings?

ULIPs have gained popularity due to the flexibility they offer to the policyholder in choosing the investment pattern along with the transparency in charges, besides the ease of comparison of the final illustrated values. Traditional products did not offer the facility to choose and change their pattern of investment in a particular policy. However, it is incorrect to say that the traditional plans are fading away with the emergence of ULIPs. ULIPs are best suited for those who have a conceptual understanding of financial markets and its operations together with a risk appetite and are genuinely looking for a flexible, long-term investment-cum-insurance. On the other hand, traditional insurance products are more suitable for investors who are financially more conservative and who are primarily looking at insurance as a means to secure their future.

How much is the premium coming from ULIPs and traditional plans?

At Tata AIG Life we have managed to strike a fine balance between all our plans. ULIP accounts for only 50% of new sales, as need-based selling is the belief of the company. Catering to multiple customer profiles, life + health + wealth solutions based on needs are recommended. "Solution flavour" is always put forth than the "market flavour" while guiding our customers.

Though allocation charges for ULIPs even out in the long term they are very high in the initial years. Does this make ULIPs less attractive as an investment tool vis-à-vis MFs?

ULIPs are not a proxy to mutual funds. While ULIPs as an investment avenue is closest to mutual funds in terms of their functioning and structure, the first and foremost purpose of insurance is and will always be 'protection'. The value that this provides cannot be downplayed or underestimated. As an instrument of protection insurance provides benefits that no investment can offer. It is important for an investor to understand that the allocation charges in ULIPs are high as it offers protection that a mutual fund does not offer. However, this does not make ULIPs any less attractive as they are long-term in nature, ranging anywhere between five years to whole of life. Over a longer horizon ULIPs provide attractive returns due to the fact that they also provide tax benefits.

In the private sector pension market where do you stand? What is the growth potential of this market?

Pension is the key area of business for insurers worldwide. Life insurance and pensions are closely interlinked - life insurance covers the risk of dying too early and pensions cover the risk of living too long - the risk of outliving one's financial resources.

India is one of the youngest nations in the world with average age of 26 years. Insurers have the responsibility to increase awareness about retirement planning, and come up with innovative products that meet young India's needs.

At Tata AIG we constantly strive to launch innovative products. For corporates we have the gratuity and superannuation schemes that serve as funding vehicles, to build a retirement kitty ensuring financial freedom for the participating employees. We are a leading private sector player in this space, and one of the few companies offering both unit linked as well as traditional funds for investment.

To help individuals build a nest egg for a dignified and financially independent retired life, we have Nirvana, Nirvana Plus and Invest Assure Plus products that serve as funding vehicles. We have been doing well in this area as well because by focusing on priority need of asset accumulation, first, we provide customers the ability to choose how they use these funds at a future date they have planned towards.

New players have innovative products and they are aggressively marketing them. How do you plan to compete with them?

We have always been committed to introducing innovative insurance solutions and are enhancing our product suite by leveraging the expertise of the partners to the venture to address the varying needs of Indian consumers. We have pioneered the concept of standalone health insurance policies in India with the launch of our products Health First and Health Protector.

We are the first life insurance company in India to launch a suite of micro insurance (MI) products and services that cater to the needs of the rural masses. And not forget the master products such as Maha Life and Maha Life Gold.

The focus of the company has always been on its customers and recommending appropriate solutions. Mere aggressive marketing has never been philosophy of the company.

How are your risk products -- Health first & Health Protector -- faring?

We are the first life insurance company in India to offer standalone accident and health (A&H) insurance products. We have pioneered the concept of standalone health insurance policies in India with the launch of our products Health First and Health Protector. These products provide comprehensive hospitalisation benefits as well as options to choose cancer care protection, family accidental death and dismemberment benefit and critical illnesses.

India still remains a hugely underinsured market and the A&H policies by Tata AIG Life, with its innovative features and competitive pricing, addresses the needs of a wide cross-section of the population. Both these innovative products have been very well accepted by the market.

Does launching a new product result into more business? What is your experience?

We believe that insurance is a need-based product. Our financial advisors are trained to understand the needs of our customers and provide them appropriate solutions keeping in mind their financial goals and objectives. Our focus is to develop a quality product portfolio. Thus launching a need-based product is of more importance than just duplicating the products already available in the market.

Tata AIG Life has a balanced portfolio that caters to the needs of individuals as well as corporates. It has been our constant endeavour to anticipate the needs of our customers and service them with innovative product offerings. We believe in providing the best of our services without focusing only on our end results.

Why are term insurance policies not so popular in India?

A term insurance policy is a pure risk cover without any element of savings or investment. Since this is a pure risk cover plan, no benefits are payable on survival at the end of the term of the policy.

Unlike saving plans like endowment and money back plans, an individual does not get his money back in term insurance plans. In India, there is a mindset against investing in a policy which provides only death benefit as the policy holder cannot enjoy the invested corpus. However, it's pleasing to note the change in the outlook of people and increasing acceptance of these products.

Is it true that even insurance companies are not pushing term products as the premiums collected are low?

We do not believe in pushing any single product in the market. Term insurance is a pure risk cover and it provides protection to the policyholder's family in case of his untimely death. The value that this provides cannot be downplayed or underestimated. It is important for an individual to evaluate their needs and requirements with a professional advisor and buy a life insurance cover based on that.