We expect Q3 to be better than Q1 and as good as Q2: Bajaj Allianz Life CEO

In the segment, life insurers are able to give better post-tax returns than fixed deposits, Chugh said

There was surge in demand for term products during the initial days of the Covid-19 pandemic, but the euphoria seems to have ebbed, said Tarun Chugh, managing director and chief executive officer of Bajaj Allianz Life Insurance. In an interview with Subrata Panda, Chugh discussed the firm’s performance in Q2, strategic changes it has made due to the pandemic, and the sudden rise in Covid-related death claims. Edited excerpts:

The first quarter saw decline in new business premiums, but Q2 seems to have been better for the life insurance industry. What is your assessment of the situation and your outlook for FY21?

Q1 for the industry, in terms of new business premium, was negative. We (Bajaj Allianz Life) had a static Q1. Q2 seems to have been far better for the industry and for us as well. We saw 29 per cent growth in July, 13 per cent in August, and the  September growth will be somewhere between 15-20 per cent. The number of new customers will keep on increasing because life insurance is becoming a pull product rather than a push product. We expect Q3 to be better than Q1 and as good as Q2, if not better. As a sector we will get back to last year’s numbers, and will not be de-growing significantly. If  there is contraction, it will be mild. 

Which are the product segments you have seen a surge in demand?

Unit-linked insurance plans shrunk for all the players in the industry, including us. But the guaranteed segment grew, as customers did not want to take any kind of market risk. In the segment, life insurers are able to give better post-tax returns than fixed deposits. These products are looking far better. 

Demand for term products rose in the initial days of the pandemic. How is it now? 

The initial euphoria over term products has come down. In Q1, they were many enquiries. Now, it has a lost a bit of the momentum, but is still higher than last year’s. 

How has your firm managed its business during the pandemic?

The kind of life goals that we are focusing on for customers have changed. What we found out was customers are not in favour of taking market risk and not looking at wealth generation, but are focusing on capital and risk protection. We are focusing on products that are endowment-based and guaranteed. We are see­ing demand for money back and income-based products.  

Irdai is looking to come out with a standard term product. What is your take?

I think it’s a very good idea. Irdai has taken a lot of steps in simplifying things and this is one such step. A retail and group standard product will really help. This will help in raising penetration, especially for people who want to get covered during Covid. There are a few features that will help customers who may not be able to pay as much. 

Insurers have turned digital, thanks to the pandemic. Do you see a restructuring in the distribution segments?

It’s tough to say whether anything will change or not structurally. But online has become a very big component and habits have altered. Earlier, life insurance was all about face-to-face meetings. So, the customers as well as the distrib­utors have learnt to behave differently. As percentage of the entire business, the digital portion is going up. Now, all my distributors are selling to the customers digitally. We intend to take this head-on now. 

Though still at a deliberation stage, do you feel if life insurers were to re-enter health segment, will it be a game changer? 

If the regulator allows the opening up of health insurance sector to life companies, it will be a great opportunity for the life insurers because we understand the business since life and health are closely linked. Also, life companies do have a significant presence in terms of branches, customers, bank partners, and advisers. So, if 2.2 million advisers start selling health polices then it will be great. 

Have you passed on the entire hike in reinsurance cost to the consumers? 

No, we have not done that. While there was an increase in the re-insurance rates, we had a very clear message from the Irdai that we cannot be doing so (pass on the entire hike). The re-insurance rates will not go up any further. In fact, what we are seeing is re-insurers easing up on the under-writing practices. 

What is the trend that you are seeing in Covid-related death claims? 

We are seeing a sudden increase in Covid-related death claims. Till July 31, we had only 90 claims but within the next 45 days, the number increased to 240. So, there is problem developing now and we need to be very careful.