"96% of our ULIP funds have consistently outperformed their respective benchmarks since inception"

Sandeep Batra, Executive Director, ICICI Prudential Life speaks with Teena Jain Kaiushal about the industry, the company's investment philosophy and the way forward for the life insurance industry.

By Teena Jain Kaushal  
Monday, December 21, 2015

Sandeep Batra, Executive Director, ICICI Prudential Life speaks with Teena Jain Kaiushal about the industry, the company's investment philosophy and the way forward for the life insurance industry.

Private insurers registered a jump of 18% last financial year? How is the trend?At a broader level the macro-economic environment has spurred individuals to increase investments in financial savings instruments.The life insurance industry has gone through changes in the last few years. There have been positive changes to products, processes and distribution - at every level with a view to making life insurance easy to understand and convenient to purchase. Importantly, customers have begun to appreciate the proposition offered by life insurance, that of protection and savings, which no other financial services product offers. A combination of all these factors have added to the popularity of life insurance.

Is high rate of lapsation and withdrawals a concern for the industry? From a customer point of view it is always advisable to remain invested for the long run. The power of compounding does wonders. To give you an example, if you systematically invest a sum of Rs. 10,000/- pm which earns a return of 8%, this sum grows to Rs. 1 crore in 26 years. It is important to emphasize that the principal invested in this period is only Rs. 31,20,000/- and the balance is from earnings.

With the introduction of cap on lapse charges, the burden of lapsation in ULIP products has now shifted onto the life insurance company. We have been educating customers on the benefits of continuing with the policy for the entire term.

How have your funds performed over last 5 to 10 years in comparison to the benchmark? Investment management at ICICI Prudential Life Insurance plays a critical role of prudently investing the savings of the policyholders entrusted with the company. Our primary objective is to consistently earn superior risk-adjusted returns for the policyholders. While we endeavor to maximize gains, we never lose track of the fact that safety of policyholder money and stability in returns are equally important. Over the last several years, we have evolved a set of policies and practices which are more stringent than those prescribed by regulators. We are a style-agnostic, fundamental research driven investment house. Strict discipline and rigor in our investment strategy has ensured a consistent and strong investment track record.

96% of our ULIP funds (debt, equity and balanced funds) have consistently outperformed their respective benchmarks since inception (as on September 2015). Customers entrust us with their monies for the long-term and we believe it is our responsibility to safeguard it, hence over 90% of our debt investments are in AAA rated and government bonds.

What do you expect in 2016 for life insurance industry? In our opinion the PMJJBY has provided a  fillip to the pure protection segment. It is a great example of how a simple product and process can change the dimension of the industry. To put this in a numbers' perspective,approximately 2.7 crore customers applied for this cover taking the Sum Assured / GDP ratio from about 63% as on March 15 to about  70%. The life insurance industry sold a little about 2.5 crore policies in FY2015.

The PMJJBY product is a simple cover of Rs2 lakhs for an annual premium of Rs 330 the policy can be issued in a matter of minutes via a text message. I think simplification of products and processes will drive future growth for the industry in 2016. With less than 2% of the premiums coming in the pure protection category, we expect a quantum jump in this segment.

The passage of the insurance act in 2015 has paved the way for the future for the life insurance industry. We believe 2016 will further strengthen the prospects of growth given the positive macroeconomic environment. As the number of young working people in the population increases, and the levels of financial awareness increase, there will be a greater need for both protection and long term savings.

The regulator has talked about making insurance products simpler? What needs to be done to make the products simpler? There is a need for simplicity - in terms of products, services and onboarding. By providing simple term products that address the basic need for protection, via an easily accessible digital platform, life insurers can work towards covering more lives. When a product is designed with simplicity as the aim, and made available in a manner that takes a few minutes to purchase, from anywhere in the country, it is bound to become the preferred choice of the majority. Simplicity aided by technology will be the way forward for the industry.

 

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