SBI Life Insurance anticipates a shift towards non-linked products by the customers, as in the last few months there have been some volatility and corrections on the equity side, says its Managing Director & CEO Amit Jhingran. In an interview with businessline, Jhingran says the insurance company has revamped its product portfolio post the changes as directed by the IRDAI, especially regarding the surrender value in life insurance policies. The insurer does not foresee that a lot of customers will start surrendering their policies in the first year itself. Excerpt:
In the life insurance space, what kind of products are currently witnessing higher traction?
If you look at the financial markets in India, the last three-four years have been very good for the equity market. People were getting very good returns and that was reflected in the sale of unit-linked insurance (ULIP) products. But, in the last few months, we have noticed some volatility and corrections on the equity side. So, we anticipate a shift towards non-linked products where the capital is assured. That is natural because when people see volatility in the returns, they want to protect their capital and this is where non-linked products come into play.
Within this non-linked product space, which are the products that are seeing good demand?
In India, insurance over the years has developed along with the savings component. Pure protection contribution to the total insurance market is on the lower side and people prefer insurance products that also provide them some kind of savings. Over the years, India’s demography has undergone immense change. With an average age of 29 years, we are one of the youngest nations. These youngsters also have very different kinds of earnings as well as spending patterns, and their aspiration levels are different, they do not mind spending for their passions. So, along with such high aspirations and spending habits comes the need for future planning. The good thing is that this generation is much more aware not only about the world but about their future too. They are cautious and that, I would say, motivates them to have some kind of financial planning for the future. That is where the non-linked, guaranteed income products come in.Here they not only accumulate capital, but they also earn guaranteed returns, which they can plan according to their life’s milestones. And to address the growing demand of such an audience, we recently launched ‘SBI Life Smart Platina Supreme,’ a non-linked, non-participating life insurance savings plan that offers a combination of protection and guaranteed pay-outs, while accommodating flexibility to plan their future earnings and future income streams. That is how the market is also panning out.
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What are the features of this product?
This is a non-linked, non-participating life insurance savings plan that offers a combination of protection and guaranteed pay-outs, with an abundance of flexibility. Customers can choose their premium payments, they can choose deferment terms, insurance level, and then the pay-out period. Here with protection, i.e. a life cover, we are also addressing the assured future income stream element by making this product flexible in terms of receiving guaranteed pay-outs.
With customer preferences reshaping over the years, how is SBI Life responding to these changes?
So, we always work on customer insights. We have a good marketing and research function that is always in touch with the customers. We also keep looking at the financial landscape of the country. Like right now, India has a very good growth rate, the income levels are also rising. The young people aspire to create assets. They are not hesitating to take credit. So, when you are creating liabilities along with assets, you have to have some kind of protection. So, naturally, the protection needs are also increasing and this is where insurance comes in. Today’s consumers are aware of their current and future needs and they are open to exploring financial planning tools to safeguard their dreams and future earnings. Youngsters today also aspire to retire early. So, they are actively planning for post-retirement income. This is where annuity products help secure their dreams and aspirations. In conclusion, we have a variety of financial products addressing the evolving consumer preferences for protection coupled with savings options for assured returns.
How often does the company relook at its product portfolio in changing economic as well as market dynamics?
As mentioned, at SBI Life product review is a constant thing that evolves as per underlying consumer needs of the time. We have periodic reviews where we not only review the existing product portfolio to see where we are getting traction, but also look at products that are falling behind. That is one thing and then product planning for the future also, depending on the customer insights, market surveys, success or failures of other products in the market. We keep introducing new products based on the evolving needs of the consumer or even withdraw products where the demand is going down. This is all supported by data that we collect through market research. Our product teams work in close coordination with the marketing teams to get the customer feel, designing and tweaking product offerings accordingly.
What is the product pipeline at present?
We have entirely revamped our product portfolio post the changes as directed by the IRDAI, especially regarding the surrender value in life insurance policies. Since August, our entire product portfolio has changed as per the new regulation. Having said so, in the recent past, we have also launched innovative and very competitive protection products, and of course, looking at the market volatility and the kind of correction that is being witnessed in the equity market, we have come up with the new product, Smart Platina Supreme. We continue to work towards providing need-based insurance solutions to our customers. In the coming times, we are also revamping some of our participating products and non-participating, non-linked product portfolios. But we would like to keep working to provide even better protection products.
So far what has been the impact of revised surrender value norms on the company?
The industry players, including, SBI Life, were providing surrender value after two or three annualised premium payments. The new guidelines say that even after one yearly premium payment, the surrender value should be provided. So now all insurance companies have accordingly tweaked their products. What the regulator has also prescribed is the minimum surrender value for any product and there the rate they have fixed is around 200 basis points more than the government security. So, all insurance companies have relaunched their products with appropriate pricing. Based on our assumptions, we have tweaked the product pricing, but the experience will be gained over a while because insurance is a long-term product. People who are onboarding, come with a frame of mind that this is a long-term product. So, we don’t foresee that a lot of people will start surrendering their policies in the first year itself. Only in the case of maybe some financial emergency would they like to do that.
