Birla Sun Life Insurance is among the oldest private insurers in India. Its CEO & MD JayantDua tells ET why mis-selling is bad for the industry, how retirement is changing and what he expects from the Budget.
The finance minister has expressed concern over mis-selling. What is the industry doing to control it?
Mis-selling is certainly a problem. Anything that makes a customer feel cheated is not healthy for the industry, but insurance companies are doing a lot to control this menace. Advisers are thoroughly screened and intensively trained before they start selling. The effort that a company puts in is reflected in the persistency figures. Our 13th month persistency figure is 85%.
What about the 60th month persistency?
This will obviously be lower because there is a natural surrender due to changes in the financial situation of a buyer or even a death claim. Globally, too, the insurance persistency figures show a cascading decline.
Life insurance sales have dipped in recent years. What factors have led to this?
The pension segment, which contributed as much as 25% to the total premium income of the life insurance sector at one time, had dried up because of the regulatory changes. In the past few months, some insurance companies, including Birla Sun Life Insurance, have launched pension products, which will revive the sales and help the industry regain the premium it lost in the previous year.
The industry has also had to reconfigure itself to the new Ulips, which are far more customer-centric given their pricing and high level of protection offered. If we sell them to the right segment after a proper need analysis, we will get the benefits of higher sales and improved persistency. It takes time to adopt changes and the period of transition is over. We are already witnessing a revival in Ulip sales.
There had been a period when the equity markets were down and debt was giving very high returns. Now that the market has revived, we expect an improvement in investor interest.
You are banking on pension plans, but can you compete with a low-cost product like the NPS, which is charging 0.5% per year compared with 4-5% in pension plans?
There are two ways to look at this. A pension plan from a life insurance company takes care of both retirement planning as well as risk coverage. You can buy pension with or without a life cover. Yes, the NPS is a strong competitor for pension plans from insurance companies, but there is place for everybody. The penetration of pension in India is very low. There is no social security. We have the EPF and PPF, which cover one in eight people. I came across an interesting statistic, which said that an average person has 420 months of working life during which he has to save for 240 months of retirement.
http://economictimes.indiatimes.com/opinion/interviews/nps-is-a-strong-competitor-but-there-is-place-for-all-jayant-dua-birla-sun-life-insurance-company/articleshow/18527914.cms
