Q&A: Kamesh Goyal, MD & CEO, Bajaj Allianz Life Insurance

'We had a tough time answering queries about Ulips' safety'

With the ministry ruling in favour of the Insurance Regulatory & Development Authority (Irda) and putting an end to the uncertainty over who gets to regulate unit-linked insurance plans (Ulips), insurers have heaved a sigh of relief and plan to launch new products. In an interview with Shilpy Sinha, Bajaj Allianz Life Insurance MD & CEO and Country Manager (Allianz) Kamesh Goyal says prolonging the matter would have been harmful for the industry. Excerpts:

How will the ruling impact the life insurance industry?
This removes all doubts regarding Ulips — doubts that have been in the minds of customers as well as agents. The uncertainty, if allowed to linger over a longer period, would have been harmful to customers as well as the industry.

How had the spat over the product’s regulation affected you?
Since it happened at the beginning of the new financial year, the impact wasn´t that much. However, it had upset plans for new Ulip products and all of us had a tough time answering customers' queries about safety of Ulips in the initial period.

Will products become more expensive after the risk cover doubles?
We need to wait for the detailed guidelines. If risk cover is made a minimum ten times (the premium), it would increase the element of protection. However, this is likely to impact people in the older age group as mortality charges become quite high after 55 years.

Is there a need for further tightening of Ulips?
Irda has already initiated a lot of changes. After huge growth from 2003 to 2007, the time has come to make the products even more customer-friendly. This would strengthen the industry in the long term.

Are Ulips comparable to mutual fund products after the recent tightening?
Not really. Insurance products, including Ulips, are about aspirational savings. That is, one wants to achieve a financial objective even if one is not there. Life products are sold across the country on that premise of protection and have a low-ticket size. Recent changes would make Ulips more for the long term, which is what life products are all about.

Will mis-selling come down after the norms are tightened, especially with the lock-in period increased to five years?
Even today, with features like benefit illustration and free-look cancellation, the customer does have all the information to decide what he has bought. I feel the industry has to move to the next level. That is, communicating in all major official languages as English might not be the right language for all customers. The main features' document is an excellent suggestion in this direction.

Do you think Ulips and pension plans will lose some attraction after the restructuring?
Pension is about savings for retirement. Thus, making annuitisation compulsory is a step in the right direction. Without this, there was no difference between Ulips and pension plans.

What do you plan to do now when the war is over and has gone in favour of Irda?
I wouldn´t call it a war. At the most, it was a difference of opinion. Such things do arise, especially as financial products become more evolved in a market where financial services have just grown beyond the infancy stage. The competition in the industry is intense and the changes proposed in DTC (Direct Taxes Code) for insurance products is still not very clear, as there are some grey areas. So, in a way, the industry is set for major changes in the near future.