 "BFSI Summit: 'New surrender rules painful but will drive insurance demand'")
Addressing the ‘pain point’ of the Indian insurance sector, industry leaders said on Friday that the revised surrender value rules will boost customer confidence by shifting the balance in their favour, ultimately driving demand in the sector.
On the final day of the three-day Business Standard BFSI Summit, Vibha Padalkar, MD and CEO HDFC Life, emphasised that while Insurance Regulatory and Development Authority of India’s (Irdai) revised surrender rules benefit customers, balancing early exits with long-term product stability remains a challenge.
At the panel moderated by Tamal Bandyopadhyay, consulting editor, Business Standard, Padalkar said that this move is seen as a step towards more customer-friendly solutions, positioning the insurance sector well for the mission of ‘coverage for all’ by 2047.
“The pain is there and disconnect in terms of what we are trying to do because we are giving very long term guaranteed products. So, having an exit early on could potentially lead to an ALM (asset-liability management) mismatch, especially if interest rates move sharply…but that is history now. When we look at the bigger picture…it is pro-customer…at the end of the first year, the customer gets a much larger amount than zero ... .and so on…At the same time, we don’t want customers to exit as these are long-term products…so, we will see how it evolves,” Padalkar said.
Mahesh Balasubramanian of Kotak Mahindra Life Insurance Company expressed similar sentiments, noting that the move will increase demand in the long-term. “We are happy that customers are going to get a higher return on surrender when they come in for the first year. It does cause some short term pain, we have made sure that the pain is absorbed by us,” he said.
Anup Bagchi, MD and CEO of ICICI Prudential Life, believes while the new rules may be painful in the short term, anything that increases trust in the sector is ultimately beneficial. “We have to ensure that we make processes smooth and then that would generate demand. We have to make it as instant as possible,” he said.
Catch all special coverage of the Business Standard BFSI Summit 2024 here: BS BFSI Summit 2024