Deepak Sood, MD & CEO, Future Generali India Life Insurance Co Ltd

Raj Pradhan

ML: IRDA is considering a ban on highest NAV ULIPs due to mis-selling; what are your comments?

DS: We are not selling the highest NAV (net asset value) ULIPs (unit-linked insurance plans) anymore. The choice should be left to the company, based on its customer analysis. IRDA (the Insurance Regulatory and Development Authority) can make improvements at the product level rather than take action at the category level. Otherwise, it will restrict the choices (for the customer). I understand that IRDA may be looking at the larger interest of the market. The highest NAV concept is followed outside India too. The misinterpretation by the customer about getting highest equity market return can be addressed by education, a transparent (marketing) brochure and documents.

ML: Traditional plans have gained importance at ULIPs’ cost. Do you agree?

DS: Earlier, we had 65% of our offerings as ULIPs and 35% as traditional plans. Today, it is 55% and 45%, respectively. ULIPs will return to prominence, as customer demand will increase eventually. Due to market volatility, customer interest in ULIPs is low. There is lesser push from distributors to sell ULIPs.

ML: You’ve done good business with single premium plans. Is that your focus?

DS: Single premium is not the focus for us. The simplicity of the product does appeal to customers. Charges and commissions are low. The distributor may want a high-charge product to sell, but the customer will get information from multiple sources to choose the right product. We focus on regular premium products. They offer better protection and regular investment. Growing family needs will need greater protection.

ML: Why should people buy traditional products which give a 5% return? Instead, they can invest money in ULIPs that have a market option.

DS: We understand that the customers of traditional plans want more security of return, more assurance and more definite outcomes. It seems to be their belief that “If I put in money, I want to know what is going to happen over a period of time and not worry about how the interest rates or markets move. Traditional plans are invested predominantly (50% or more) in government securities (G-Secs), infrastructure bonds, corporate bonds and not more than 15% in equities. The return on G-Secs in the past 10 years has varied between 4.97% (October 2003) and 9.47% (July 2008); now it is 8.3%. We feel inflation will come under control and growth will pick up soon. With investments in long-term insurance policies (20 years or more), customers will benefit. Most people don’t actively use the switch option in ULIPs.

ML: How do you ensure that you don’t reject genuine claims?

DS: We do see mis-declaration related to giving a lower age or disguise of ailments, in an attempt to seek lower premium. It is a problem. Rarely do we see a terminal illness kept hidden. We have a claims committee headed by a retired High Court judge. Any customer protest against any claim rejection is examined by this committee taking a pragmatic view of the situation, rather than considering any issue as a plain fraud.

ML: What are your thoughts on the draft document on pension regulation?

DS: The pension market is large. We will see more players getting in as the guaranteed returns will not remain, like today, at 3% to 6%. Pension products will continue to offer some guarantee. The choice of insurer for the annuity phase of the pension plan should be left to the customer. Let the companies compete rather than having captive customers.