What kind of an impact this lockdown will have on the sector?
March is a heavy month when a lot of people buy life insurance policies and with the sudden lockdown, I am expecting it will have some impact on the industry in general. We are yet to see any upside on claims because the number of deaths in India is not alarming so far. So, unless it becomes really a big epidemic in India where a huge number of people are getting sick and lakhs of people dying, I do not see a major impact on the sector. From the company’s perspective, we will be making required provisions to make sure that our financials are protected.
Will there be an impact on your solvency margin, given so much volatility in the equity markets?
I think we will be quite okay on solvency margin. The requirement is 150 per cent and we take an internal target about 170 per cent and as things stand we are above 200 per cent. So, we are safe now. A large part of our equity market exposure is in ULIPs, which is anyway mark-to-market at all times and it doesn't flow into the capital. So, it is not going to have an impact. There may be some impact on participating book. But because of falling interest rates, the rates will get revised. So, it will have a compensatory effect. We are not expecting a huge impact, and anyway, when sales go down, then the requirement of capital actually goes down which helps in maintaining the solvency ratio.
How much stake Axis Bank will take in Max Life?
We signed an exclusivity, confidentiality agreement, under which three parties — Max Financial, Max Life and Axis Bank — are working together to construct something which is long term, more strategic and will involve equity. Currently, Axis Bank owns about 2 per cent in Max Life Insurance
and the desire will be to take that ownership to a reasonably larger number so that they participate and in a more meaningful way in the value creation.
How has the year been for you?
For me, the year can be classified or broken into two parts - until March 24 and after. We were doing very well until February growing at 17-18 per cent year on year. But as we finish the year, my sense is that we will we are going to be in a single digit. The current situation is creating discontinuity not just for us but for every industry anywhere. In the absence of Covid-19, we had a very aggressive plan with a target closer to a 20 per cent growth number.
What will be your strategy now?
We will try to sell more protection products, we will also try to sell more guaranteed products and ULIPs, considering stock market has come to the lowest levels. If you see, every year we have been increasing protection penetration. One-third of the policies we write are protection policies.
The way the situation is the awareness for protection products will get a tail wind out of the current situation. Also during uncertain times, people like to have certainty around their saving option so the non-par guaranteed products well designed for this. We also are focusing on simple products since we are now trying to interact on digital tools.