Optimistic about the outlook for the life insurance industry, NS Kannan, Managing Director and CEO, ICICI Prudential Life Insurance, said as of now Covid-related claims for the sector are under control. In an interview with BusinessLine, he said while there continues to be demand for protection and health products, underwriting norms have become stricter for retail protection. Excerpts:
What is your outlook for the life insurance sector?
Amidst the pandemic, life insurance sector ended in the growth path. I expect the industry will see double-digit growth. We will have to watch how the pandemic develops but we will get back in line with nominal GDP growth of about 15 per cent.
Is the surge in Covid 19 infections a cause for concern for the sector?
Our industry’s claims will be linked to overall mortality of the insured population, which is very much under check. I don’t think it will be a big concern for the industry. We have increased the provision by another ₹33 crore in case some deaths have not been reported to us. Also, given the emergence of the second wave, we decided to be prudent and create a provision of another ₹299 crore. So, as of today, we are carrying a provision of ₹332 crore.
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How many Covid-related claims has the company paid?
We have reported 2,500 lives we had claims on in terms of number of deaths in our portfolio. Net of reinsurance, we had to pay out about ₹264 crore as claims.
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What kind of products do you think there will be more demand for?
There has been a lot of demand for protection products and also health insurance products we are allowed to do. There is also momentum in group term insurance. The only caveat is that we are not able to entirely fulfil the entire demand. Given the pandemic one has to be careful about underwriting. Also, for large insurance, we need the support of reinsurers and they are also focussed on proper underwriting. Underwriting standards have become tougher. There is also still a bit of friction in terms of medical examination, which is needed for higher value insurance. This has slowed down the process of issuance. Demand is up but in retail protection there are some supply-side constraints.
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Credit life, which is the second segment of protection, had got impacted in the first half but has come back in the second half because banks and NBFCs have started disbursements for retail home loans and other loans. Group term has been a huge opportunity and we had about 100 per cent growth in the segment.
Has there been an impact of the Budget proposal on ULIPs?
As an industry, we have moved away from tax-based selling to goal-based selling. Second, ULIP is a powerful product, allowing customers to take advantage of market movements in a transparent and tax-effective manner. Even in the new regime, customers can invest up to ₹2.5 lakh without tax implications. The new regime was in place from February 1 and there were two full months of this impact. But in our case, ULIP segment has grown 11 per cent year-on-year in the fourth quarter. Empirical evidence of the two months indicates there is no impact at all. As long as long-term investments are on the same platform across mutual funds and insurance, there is nothing to worry.
What is your strategy, going ahead?
Despite the pandemic, we are not changing our strategy to double our value of new business to about ₹2,650 crore by 2023. We will continue to pursue it through the 4Ps of premium growth, protection business growth, persistency improvement and productivity enhancement. Our focus will be on top-line growth. In the fourth quarter, we are firmly back on the growth back and that gives us confidence. We have about 600 new partners and we added seven significant banks last year. On the product side, we have a much diversified product mix. So all this gives us a lot of confidence that we can pursue top-line growth and expand the VNB.
Term insurance rates have been increased by some insurers. Will there be more repricing with the second wave?
The increase in term insurance rates was driven largely by reinsurers increasing the pricing. To the extent of reinsurance pricing, we passed it on in the month of July (last year). We don’t have any proposal to further increase pricing.
We don’t know how the second wave will emerge. We have to wait and see. World over, I don’t think the conclusion has emerged so strongly regarding the lingering or long-term mortality impact of the pandemic.
How do you view the increased FDI limit for the sector?
We wholeheartedly welcome the move as a company and industry. Recently, the draft rules were gazetted, which are reasonable and easy conditions to comply with. Insurance penetration is very low and it being a regulated business there will always be strict capital requirements for the industry and so foreign capital is always welcome. For us, it is a shareholder issue and not a company issue. As an insurance company, we don’t require any capital. We are quite well-capitalised with 217 per cent solvency ratio. We have also increased about ₹1,200 crore of Tier 2 capital.