We caught up with Satishwar B, Managing Director and CEO of Bandhan Life Insurance, earlier Aegon Life, to talk about how the life insurance industry has evolved post-Covid and the outlook for Bandhan Life.
Edited excerpts:
Why does the life insurance industry not focus more on selling protection through pure term plans? Why does it focus on savings products?
In India, there’s a significant portion of the population that requires protection. To cater to this, we introduced a selfie-based term insurance product that is highly affordable and offered an e-commerce type experience for easy purchase.
While we have tackled the issues of affordability and accessibility in acquiring term plans, demand for them has not picked up as expected. This is partly due to the prevailing mindset among many individuals that “the risks of death apply to others, but not to me.” This reveals a need for consumer education about the importance of term insurance.
Even though awareness about life insurance has risen, it is still viewed mainly as an expense. People understand what life insurance is, but lack a sense of urgency about buying it. The industry has made significant strides in simplifying the purchasing process. But addressing the lack of urgency remains a challenge.
Has Covid not convinced people about the need for pure term plans, with many families losing bread-winners? Hasn’t Covid made term plans more expensive?
When you look back, the premiums for term plans remained stagnant for over a decade. Reinsurers had indicated that adjustments were necessary to maintain viability, based on the evolving experience. This was further accelerated by the onset of Covid.
While the pandemic led to a significant uptick in the demand for life insurance, the industry was compelled to revise underwriting norms to manage the new levels of risk presented. Now that the immediate crisis of the pandemic has receded, there is a decrease in the urgency for life insurance. But there has been a better understanding of its importance.
How has claims settlement been on life insurance during and after Covid?
We, at Bandhan Life, have maintained a high claims settlement ratio and improved on it. We were at about 99.4 per cent during Covid. The latest number is 99.66 per cent for FY24. This is one of the highest in the industry. The data-driven underwriting model we now use has given us a lot of confidence about the policies we issue and is a source of great pride for us.
How does data help you issue life policies?
The use of data helps us make our processes more efficient, and allows us to assess income levels and affluence. With the customer’s consent, we are also able to access Vahan data on vehicle ownership. The account aggregator framework assists us in evaluating financial asset ownership. We conduct video calls with customers as well.
We are also leveraging data to reach new segments of buyers. Previously, term plans were mainly sold to salaried individuals, with 90 per cent of the industry’s term plans being sold to this group. But we have developed a model that uses data to assess risks for self-employed individuals. As a result, over 60 per cent of our term plans are now with self-employed people. Data and digital technologies have provided us with a platform for scalability.
There have been quite a few changes to insurance regulations. For instance, IRDA has removed the cap on commissions paid on insurance products, and has allowed you to pay what you prefer subject to an overall limit on your expenses. How does this impact you?
The good thing is that all the regulatory changes we are seeing are aimed at improving the customer experience. They are absolutely right to focus on the customer. For instance, traditionally, insurers collected money from the customer upfront and then decided whether to provide the service, that is, issue a policy. Now there’s a regulation that money must be collected only after you decide to issue a policy. That’s a wonderful change from a customer perspective. From an industry perspective, this needs to be figured out, especially in a partner-driven model. Most insurance products, whether term or savings products, are quite competitive. We sell through partners and incur costs on medical tests. If the customer changes his/her mind, we will need to budget for that. But it’s not a big thing. Overall, it’s a welcome change in the right direction.
How is the takeover by Bandhan Bank likely to change Aegon Life’s business, which used to focus on digital-only and term products?
When we used to say “digital-only” at Aegon, people assumed it meant a direct-to-customer model. However, we’ve always been a B2B2C insurer that used distribution. We used a digital interface to engage with our partners.
But beside this, we don’t seek physical documents or scans from customers. Instead, we obtain them digitally from the source, such as Aadhaar-based KYC with the customer’s consent. This approach ensures that customers’ Aadhaar copies are not put at risk. We also utilise data to assess the type of risk we’re undertaking.
Our digital and data-driven capabilities are what led Bandhan to invest in Aegon. They have a large distribution network and can leverage our digital processes to serve their customer base. We’re excited about this journey as we aim to become a multi-channel, multi-product company. Starting in September, we are operational in 600 Bandhan Bank branches across West Bengal, Bihar, Assam, Tripura, and other eastern and northeastern markets. The partnership was launched with two new products: iGuarantee Vishwas, a savings insurance plan with guaranteed returns, and iInvest II, a unit-linked insurance plan. We also plan to expand our product range to include annuity and savings products, which will help diversify risks.