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IDBI Federal Life Insurance chief says it is hard to believe that masses of agents will indulge in duping customers. He explains that if the company comes across mis-selling by an agent, it takes appropriate action
GV Nageswara Rao, managing director and chief executive officer of IDBI Federal Life Insurance Co Ltd, talked to Moneylife about the various aspects of ULIPs since new regulations came into force from 1st September. He discussed agent incentives, the new charges and explained that the company does not hesitate to take action against mis-selling. Here are excerpts from the interview.
Moneylife (ML): What has been the difference in the mix of business (traditional versus ULIPs) before and after 1 September 2010?
GV Nageswara Rao (NR): Earlier, ULIP was 80% of the business and now it has dropped to 65%. ULIP and traditional life insurance products offer value to different segments of customers. It is good for diversification of portfolio. We are not focussed on promoting any specific policies. In ULIPs too, we have the option for single and non-single premium and we make equal efforts to sell both, even though single premium is easier to sell.
ML: There were instances in the past, where ULIPs were mis-sold. Did you face this issue with your agents?
NR: ULIPs mis-selling is an exaggeration. There are lakhs of agents who sell crores of policies every year. It is hard to believe that masses of agents will indulge in mis-selling to dupe customers. There is a human angle to be considered. Apart from agent training, we rely on giving proper documentation along with the summary of policy to spell out exactly what the customer is buying. We give a ‘Welcome’ call to customers to recheck if the customer has understood the policy. Sometimes, the customer thinks he is buying a single-premium policy rather than a regular ULIP. The customer is free to make changes within the free-look period. If we come across any mis-selling by an agent, we take appropriate action against the agent.
ML: Will the agents make as much commission as prior to 1st September based on persistency in ULIP policy renewals? IRDA has just spread out the first year charges over few years without really reducing charges over a period. (IRDA is the Insurance Regulatory and Development Authority.)
NR: The agents will certainly benefit from policy renewals and hence persistency will increase. There is always risk of policy surrenders and hence discontinuation of commission. Even if policy gets renewed every year, I don’t think agents can make as much commissions as earlier from ULIPs.
ML: What is your plan for a breakeven point? What are your views on the guidelines that require a company to be ten years in business before going for an IPO?
NR: We started in March 2008 and hence are late entrants in this field. We have strong bancassurance with IDBI Bank and Federal Bank that will help us to improve our market share. We should breakeven in seven years. If an insurance company has proved itself with its performance, there can be a case for reducing the number of years in business before going for an IPO.
ML:Why have mortality charges been increased by some insurers for the younger group?
NR:The current LIC mortality tables used by insurers are from 1994-96. New tables will be out in a couple of months. The claims experience in industry shows that there is increased mortality in the younger group due to accidents or other fatal diseases. The reverse is true for the older group that is living longer due to better medical facilities. The new tables reflect the higher mortality for the younger group and lower mortality for the older group.
ML: LIC has the lowest claim repudiation rates. How does IDBI Federal stand with respect to claims settlement?
NR: The repudiation rate will be skewed for insurers who started operations in the last few years. When a life insurance company gets a claim within a few years of the policy start there is always investigation and possibility of claim repudiation. If the policyholder has made all declarations while taking the policy, the claim is genuine and all the claim paperwork is submitted, we don’t delay in making payments.
ML: How do you see business for Health insurance products?
NR: Health insurance products have not done as well as we expect, but we hope the health insurance concept grows in India. Even though we don’t have a mediclaim like policy for reimbursement of expenses, the health insurance products are a great alternative. There are lump-sum benefits for surgery, lump-sum convalescence benefit for longer stay, additional cash benefit for admission in ICU, no bills required daily cash benefit for each day of hospitalisation and receipt of cash benefits up to Rs20 lakh a year.
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