Share of term products will rise this yr: Bajaj Allianz Life Insurance CEO

Currently, the growth trend has not stalled but it may going forward, but life insurance as a sector will be one of the fastest growing sectors, says Bajaj Allianz Life Insurance CEO Tarun Chugh

After two Covid-marred years, life insurance firms are looking at a good year of growth in the current fiscal year. Tarun Chugh, managing director and chief executive officer, Bajaj Allianz Life Insurance, speaks with Subrata Panda on how the company fared in FY22, easing of supply-side constraints, and impact of increase in term prices on demand for such products. Edited excerpts:

How was FY22 for the comp­any and how do you see the current year panning out?

Last year was pretty good for the life insurance sector, and for us, it was, particularly, a brilliant year. We grew at 49 per cent over the previous year. Among the top companies, we were the highest. Currently the growth trend has not stalled but it may going forward, but life insurance as a sector will be one of the fastest growing sectors. The first six months should be good because of the base effect of last year and then there will be some mellowing down of growth. A lot will depend on the stock markets. Today the impact of the stock market has not reflected on the life insurance industry.

Which product segment has done well for the life insurance sector?

Last year, ULIPs (unit-linked insurance plans) had seen a slowdown, so because of the base effect they have shown some growth. What has worked for the sector is the guaranteed products. We have been able to offer good tax-free long-term guaranteed returns and during Covid, with risk already quite high on other things, people did not want to take undue risk.

How will your product mix change going forward, given the circumstances?

Our product mix is very different from what it was two years ago. So, we introduced guaranteed pensions, which is now 10 per cent of the portfolio. The guaranteed products have grown to 30 per cent from 20 per cent earlier. ULIPs, which were upward of 50 per cent, are now down to 40 per cent. The rest is term products and par products. Going forward, I think, term insurance share will increase this year because there is more clarity around reinsurance. Last year, the process of onboarding had gone for a toss and too many changes from the reinsurer’s side were happening. The share of pension products would remain constant. ULIP’s share will be linked to the markets.

Have the supply side constraints eased?

As far as savings plans are concerned, last year, face-to-face meeting was an issue. But that has been sorted out now. The processes for onboarding term plan customers were a big problem because there were frequent changes due to Covid and reinsurers. We are seeing stability there, so it should have a positive impact.

Has the increase in term prices impacted demand?

No, it has not. India’s term prices are one of the lowest in the world. So, a slight increase here and there is fine, particularly, after Covid. It is processes or the surety of getting issued a term plan that impacts (demand) more than prices.

Directionally, will term plan prices keep moving upwards?

Another 10 – 15 per cent increase and we should be fine and it will still mean that term prices in India will be the lowest when compared globally.

What kind of impact did Covid death claims have on the company?

Last year was rather tough because the second wave, which finished around June and even spilled into July, had a heavy toll on all insurance companies. The third wave was nothing compared to the previous one. We paid around Rs 2,000 crore for death claims and Covid would be around Rs 350 crore. We have kept reserves for this year but I don’t see us using that reserve. I don’t think any life insurance company had a solvency issue because of Covid as the insurance regulator’s guideline is conservative. The only impact it had was on the profitability front.

Will we see some change in underwriting standards that were tightened over the course of the pandemic?

It has already started changing. All of us are taking some bolder calls and insuring more on our books than that of the reinsurers. Having said that, reinsurance does play a critical role because they are pooling risk across the globe, which we cannot do. So, if India is bad, they can balance it elsewhere. So, reinsurance will play its part, albeit a little less.

Are you looking at inorganic opportunities of growth? Or any plans to list?

There are no plans to acquire anything. We are getting our own internal growth. And, there are no listing plans as well. We do not require any money as a company and shareholders are not looking to cash out as well.