Future Generali India Life Insurance: “ULIP charges are squeezed; wonder if any insurer charges less than the maximum allowed”

Future Generali believes that the life insurance market is big enough for all the players to compete in newer areas and segments. Deepak Sood, MD & CEO, Future Generali India Life Insurance, says that good claims settlement ratio and quick claims turnaround time are the main drivers of customer satisfaction and retention. Excerpts:

You have an online term plan, but the premium pricing is higher than competitors. Is the pricing aggressive by your competitors?

Every company is doing calculations based on actuarial analysis and submitting justification for it. It is approved by IRDA with checks and balances. Mortality improvements are envisaged and hence charges have dropped. It's not an assumption. Policy lapse in term plans could be a worrying thing.

Insurance companies' view of the future could vary. There could be different assumptions for different aspects like customer-acquisition costs, cross-selling, time horizon (for profitability), aggressive or conservative approach. If there are too many assumptions it could be dangerous, but IRDA keeps a tab of on the solvency ratio closely, with asset-liability management. I don't foresee any problem for the customer even if premium rates for term plans are low. There is no question on ability and will to pay claims by insurance companies.

Is there an assumption that online term plan buyers are an educated class of people with better access to healthcare and hence will live longer? Some insurers allow only specific cities to buy online term plans at a cheaper rate.

I don't buy that concept. In Mumbai alone, you have people from everywhere (low and high income) having access to the Internet who can buy online term plans. E-channel and the Internet will pick up in all the cities and offer access to a wider range of people for online purchases.

Will insurers with aggressive online term plans have low or zero tolerance for any discrepancy while settling death claims?  

I don't think there is any insurance company which sell policies to decline claims. At the same time, insurance companies owe to other policyholders a fair settlement of claims (with checks & balances) as claim payment comes from the pool of premium collected. Claims settlement ratio and claims turnaround time are public information. We would like to offer easy and fast claims settlement.

But your claim settlement ratio is low and claims pending are high.  

As a new insurance company goes beyond three financial years, these ratios improve and sample size becomes big. 2011-12 will be much better for us. For a death claim, a customer with us for 10 months will not have the same treatment as someone with us for 10 years. The early claims (within three years of policy purchase) do take time for investigation and claims settlement. The onus is on the insurer to be fair in claims settlement as well as to the other policyholder (to not pay unfair claim). Quick turnaround time for claims also mean more manpower is needed.

The premium allocation and policy administration charges are also high for the recently-launched Future Generali Bima Advantage ULIP.   

There is a squeeze on ULIP charges with regulatory caps. The surrender charges are also low. I wonder if there is any insurer charging less than the maximum allowed. Everyone is stretching to the maximum. Charging less is not possible. Over the period of five years, insurers will have different structures for spread of charges based on their product design. Everyone will be more or less the same.

Insurance industry mortality charges for ULIPs are high when compared to premium for term plans. Should there be a cap on mortality charges for ULIPs?

ULIP mortality charges depend in different parameters like commissions, margins, medium of sale and pricing philosophy. As markets continue to mature, there will be more than one morality table. One for the population as a whole, and another developed by the insurer based on its own experience, and segments targeted to provide right and rational pricing. (I am) not in favour of bringing in regulations for it.

How do you compete with LIC?

We are small when compared to LIC. The market is large for LIC and also for other insurers. There are newer areas and newer segments to improve penetration level. With growing disposable income, there is room for our plans and aspirations. Due to smaller size we can move faster for making investments. We want to give good customer investment returns and retain customers.

Lot of agents have left the business. Any layoffs in your company or closing of offices?

We don't lay off agents, no one in the industry does. Agents work on commission; they are not a fixed cost to the company. Increase in the number of agents is welcome to the company. Agents leave the business when it is not remunerative for them or they find other sources of income. They leave when their personal time to benefit ratio is not working. In this case, we just stop hearing from them. We try to activate them and see if they continue in the business. We have 56,000 agents and some of them will have licence expiration soon (they have a validity for three years). We have not closed any office.



Tax Savings

5 years ago

ULIPs are indeed a good investment vehicle from tax savings perspective as well. But the purpose should not be confused with that of Term insurance. Although ULIPs provide life cover to the insured, term insurance is very critical from the amount for which the person is covered. For the same sum assured, ULIPs can be quite expensive. Moreover, they are dependent on Market risks, so it is critical to assess one’s risk appetite before buying ULIPs.

85% Indians want more insurance to protect lifestyles: Survey

According to the ING Investor Dashboard Survey for the second quarter of 2011, more than 75% of respondents that believe they have less coverage than they require want to purchase an additional insurance policy in the coming 12 months

New Delhi: Amid rising disposable income levels and better health, education and housing conditions, as much as 85% of middle income earners in India feel a greater need for additional insurance to protect their lifestyles, reports PTI quoting a survey.

According to the ING Investor Dashboard Survey for the second quarter of 2011, more than 75% of respondents that believe they have less coverage than they require want to purchase an additional insurance policy in the coming 12 months.

The survey reveals that within the Asia-Pacific region, Indians feel that there is a greater need to protect their lifestyle and intend to purchase additional insurance policies in the next one year.

"With rising disposable income, better health, education and housing conditions, more and more individuals have lifestyles that they want to protect," ING Insurance Asia Pacific CEO Frank Koster said, adding that insurance policies with attached savings plans are proving to be the product that attracts the maximum demand.

Priority-wise, within the Asia-Pacific region, Indians attach the highest importance to their children's education after the need to protect family income. Saving for retirement is the third-most important priority for Indians, the survey said.

"Indians have a strong desire to give good education to their children. Compared to the region, Indians have the backing of a joint family system, which makes retirement planning a lesser priority," ING Life India chief marketing & strategy officer Uco Vegter said.

As the nuclear family system grows in India, we will see growth in the retirement segment too, Mr Vegter added.

Due to prevailing high interest rates, the Indian middle class finds fixed deposits their favourite instrument to plan for their child's needs, followed by life insurance policies.

The survey further reveals that parents are starting to save for their child early, with over 45% of the Indians surveyed asserting that they prefer to start saving for their children when they are 0-3 years of age.

The survey tracked insurance purchasing behaviour across seven markets (China, Hong Kong, India, Korea, Malaysia, Thailand and Japan) in order to explore the lifestyle choices of Asia's middle class.

The survey was conducted in June 2011, and involved online interviews with a total of 2,329 middle income respondents aged 25 years and above across seven Asia-Pacific markets.


High prices: India calls for improved farm productivity at G-24

"Increased investment in agriculture and productivity should be the strategic priority of G-24 to cool prices and provide food security to our people. There is a need to ensure transparency in commodity markets," finance minister Pranab Mukherjee said at a meeting of G-24 finance ministers on Thursday

Washington: Terming high global commodity prices a 'grave threat, finance minister Pranab Mukherjee has called for developing countries to increase their investments in agriculture to improve crop productivity, reports PTI.

"The recent commodity and food price rise and their volatility constitute a grave threat to economic growth and food security in our economies," Mr Mukherjee said at a meeting of G-24 finance ministers here last evening.

He took over as the new chairman of the group from South African finance minister Pravin J Gordhan toward the end of the meeting yesterday.

The G-24 grouping comprises 24 developing countries from Asia, Africa and Latin America. It aims to ensure increased representation and participation of developing countries in negotiations on the reform of the international monetary system.

Economic development and poverty alleviation, he said, is a challenge and the next few months would be crucial for the global economy.

"Increased investment in agriculture and productivity should be the strategic priority of G-24 to cool prices and provide food security to our people. There is a need to ensure transparency in commodity markets," he said.

Mr Mukherjee further said the G-24 should continue to push for more ambitious progress on reform of the governance mechanisms of international financial institutions (IFIs).

"The multilateral development banks need to also mobilise more resources to increase their assistance to low income and other developing countries, including finding ways of expanding their lending capacity, so that development finance is not neglected," he said.

The Indian finance minister also highlighted the need for building infrastructure in developing countries to promote growth.

"Another strategic priority that I hope to see focused action (on) is on the development of infrastructure in our countries. Gaps in infrastructure remain significant bottlenecks to growth," he said.

India offers huge opportunity for investment in infrastructure. Its 12th Five Year Plan (2012-2017) envisages an investment of $1 trillion on infrastructure to enable the country to maintain its high economic growth rate.


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