What is the strategy with regard to sales and distribution?
Unlike some other insurers, we have a strong agency force of 78,000. So, every sales manager has a wide number of advisors who come to the branch to service customers. The other aspect is online, getting stronger for us, with new products being launched exclusively for online sales like Goal Assure, a unit-linked insurance product (Ulip), and E-Touch, a term insurance. We are also planning to introduce a virtual account manager, which will allow customers to choose the kind of non-intrusive services they want with us, not only at the time of renewals.
We are also setting up a proprietary sales channel because such group products are fundamentally all about the firm's employees, the quality of approach, quality of discussion and services - these can be really controlled through a dedicated channel.
What is the reason for the new Ulip launches over recent years?
After 2013, the new-age Ulips actually became very friendly, unlike mutual funds (direct basis), which charge anywhere from 1.25 to 1.5 per cent for fund management. Insurance Regulatory and Development Authority of India (Irdai) has put a cap on fund management charges for Ulips at 1.35 per cent. In Goal Assure, we charge Rs 400 as policy administration charge, and there is a mortality charge which we return to you, a first-of-its-kind innovation. The general perception of a Ulip because of what happened in the first 10 years of this sector is stuck, although the regulations now actually make these cheaper than mutual funds (MFs). The problem is that in the MF industry, you can talk about your past performance, you can project it. We, on the other hand, cannot.
What are your thoughts on the tax arbitrage between Ulips and mutual funds?
Let people see the performance of our funds. Tax arbitrage is incidental; it is there today, it might not be there tomorrow. We come under a different Act; so, when you take a 10-times cover, you get a tax rebate. If the arbitrage were to go, they (regulators) would have to repeal that section for all life insurance products.
I think this classical discussion that life insurance products should only have life insurance covers and should not have investment along is entirely misplaced. Today, my fund manager gets incentivised when thinking of a five-year, 10-year horizon, unlike managers of MFs. It's very important that your investment strategy, incentive structures, your dialogues and your products are all based on the same line of thinking. That way, even your salespeople will hold you to task for not performing in the long term.
Your thoughts on the stock markets and investment climate?
The volatility in both bond and equity markets does not deviate us from the investment philosophy of staying with good quality companies for the long term. With economic growth recovering, we feel corporate earnings will recover meaningfully in 2019-20. We feel sectors like information technology, metals, private sector financials, pharmaceuticals and consumer durables will drive earnings growth.
How do you view the challenge of building an effective digital channel for sales and services?
We realised that when we sold these through aggregators, we were selling a whole lot, even in non-metros. The branch today has technically shifted to the phone; customers are ready for it and, so, we are constantly thinking about how to expand the market to target young people. Young customers have goals, they want a non-intrusive experience and they do their research before purchasing. They will interact with you, in the same way they will interact with every other service, on their smartphone. We are trying to get ready for this change.