The life insurance industry is at the crossroads. Before it could completely recover from the adverse impact of changes to unit-linked insurance product norms in 2010, the regulator has come out with new norms for traditional insurance plans, which account for a lion’s share of insurance business. As a result, all products would have to be withdrawn and offered again after obtaining regulator’s nod.
Business Line spoke to Rajesh Sud, Chief Executive Officer and Managing Director of Max Life Insurance, the fourth largest private insurer with over Rs 20,000 crore of assets under management on the prevailing industry scenario and its plans.
How is the industry coping with new norms for traditional life insurance products?
According to new norms, all existing group products have to be aligned with new rules before June 30 while individual products have time till September-end. But, the challenge is that this is happening at a crunched period. It takes time to design a product, get it approved and then introduce in the market through our sales force. There will be over 400 products which have to be approved by the regulator and it remains to be seen if there will be any delays in approvals from IRDA. On the whole, there is lot of work for every one.
How will all this impact business and customers?
We should have been given more time as this does not benefit anybody in the short-term. The new regulations should have come a bit later. To take product design route to solve all problems in life insurance sector may not be entirely appropriate. The impact on the business cannot be ascertained as all would depend on the time to be taken by IRDA for new product approval.
At Max Life, we quickly adopted ourselves to the ULIP norms after 2010. We hope to do the same again.
What is the ratio between traditional and unit-linked insurance products in Max Life’s range? What is the customer preference?
On total premium basis, it is 65:35. After changes in ULIP norms about two years ago, the traditional products have been gaining ground. We asked customers their choice between 12 per cent returns on the investments with a volatility that might lead to up to 2 per cent negative returns through equity-linked plans, or 5-6 per cent steady returns through traditional products. Many preferred safety to volatility. Hence, the traditional products is here to stay.
Are there plans for capital infusion? Is there any interest in public issue?
Currently, we have enough – the solvency ratio is three times higher than the mandatory ratio fixed by the regulator. So there are no immediate plans. Coming to the initial public offer, our valuations got established when there was a change in our joint venture partner last year and we don’t need it now.
What are your expansion plans?
Our distribution channel is well diversified. We have a platinum quality agency force with 36,000 agents and tied up with banks such as Axis Bank for bancassurance. We are present in 150 cities. A digital channel of distribution will be launched shortly.