'Current scenario is volatile, but bodes well for the insurance industry'

Kamlesh Rao, managing director and chief executive officer at Aditya Birla Sun Life Insurance shares his views on the road ahead for the life insurance industry

At a time when Covid induced uncertainties around life and money, turbulent markets and falling interest rates played a key role in increasing demand for relevant life insurance products, says KAMLESH RAO, managing director and chief executive officer at Aditya Birla Sun Life Insurance in an interview with Puneet Wadhwa. Edited excerpts:

How has the insurance sector evolved during the pandemic? 

The pandemic has been an uncertain moment in people’s lives and has been around longer than expected. It has led individuals to realise the need to protect one’s health as well as finances even more. This shift in mindset created a pull for a largely push-driven, underpenetrated segment and augured well, turning headwinds into tailwinds for several insurers. The industry witnessed heightened demand for pure protection or term plans and guaranteed return plans, on the back of assured financial protection to future money needs. 

Has the demand for unit-linked (ULIPs) plans dipped?

The drift towards secured avenues of protecting and growing money, coupled with risk-averseness saw the share of ULIPs dipping tad bit, giving way to term plans, despite hike in the premium rates of pure protection covers. This trend reinforced that in the past one year, life insurance evolved from just being a tax-saving tool to a comprehensive and reliable financial protection solution for people.

What has been the industry and Aditya Birla Sun Life Insurance’s (ABSLI’s) experience with riders / add-on covers amid this pandemic?

Riders and add-on covers have been slowly picking up. Riders such as Accidental Death Benefit and Waiver of Premium made major contributions to the overall rider attachment in the last one year. However, the overall contribution in premium terms has been minimal.

How have you fared business-wise (new business premium) in the past financial year and what is the road ahead? 

The pandemic induced uncertainties around life and money, turbulent markets and falling interest rates played a key role in increasing demand for relevant life insurance products. Despite the extremely challenging operating environment, ABSLI grew about 14 per cent last year in New Business Premium (NBP), while the growth of private players was at 8 per cent. We launched six new products across term insurance, child insurance and guaranteed savings, which contributed to 24 per cent of our yearly volumes and thereby significantly to our NBP growth. In the current scenario, it is very difficult to have short or long-term views. We understand that there is increased risk awareness and demand for life insurance products amongst people today and is thereby an opportunity for life insurance companies.

Is a hike in premium across categories, or any particular category on the anvil?

We have not increased premiums currently, however, the company will closely monitor the pandemic experience and will further decide on the premium rates. Also, change in the re-insurance rates through the year will be another factor that will determine the premium rates. For now, there has been no increase.

How is ABSLI – and the insurance sector as a whole – dealing with the uncertain market and interest rate scenario?

Current market scenario is volatile, but bodes well for the insurance industry. The rise in the equity market is allowing insurance companies to deliver very good results to the policyholders, in terms of returns. Also, hardening yields offer better ammunition to the insurance industry to manage guarantees easily and even lock in good yields for future cash flows of already underwritten policies. This is done through Fixed Income Derivatives (Forward Rate Agreements), which helps insurance companies to manage guarantees in a better way. However, in equity markets the best way to manage guarantees is through index derivatives, but unfortunately life insurance companies are not allowed to deal in these derivatives as per current regulations.  

How are your individual and group life cover businesses faring? There are reports that companies may hike premiums for group life cover. 

The industry is witnessing increased demand for pure life cover or term plans and the momentum has received tailwind owing to the pandemic. While we have achieved double digit growth in our individual protection business, we are tad mindful of the risks we want to underwrite for the group business. 

Overall, term insurance prices have seen a jump, as life insurance companies have incurred losses due to higher mortality. On the individual side, we haven’t seen immediate price hike so far. However, on the group side, the reinsurance companies have already started to relook at their premiums and the rates are going up anywhere between 75-100 per cent. It has started impacting and the group term rates are becoming costlier. For the individual business, we will come to know over the next three-four months.

Some online insurance broking firms are now setting up shop on the ground. How will it change/impact the industry going ahead?

While, it is not about the impact in the next few months, but it will definitely have a long-term impact towards increasing the penetration, accessibility of insurance and more choice for customers. This move will be a win-win for both online insurance broking firms and the industry. In the last 18 months, online sales has been a differentiator for traditional and leading life insurance companies, wherein large part of the sales happened online facilitated through their advisors and Bancassurance partners. At ABSLI, 95 per cent of our services were enabled online with 70 per cent self-service ratio. While, consumers are getting used to the digital way of insurance transaction, there will be still certain customer segments and types of products where the physical mode is preferred.