The life insurance industry in India has come together to bridge the significant protection gap – the difference between available insurance coverage and actual needs in the event of the death of a policyholder – by organizing awareness campaigns and offering customers more flexibility in terms of coverage and method of payment. In an interview with MintReinsurance support and additional consumer health data that helps reduce friction around underwriting are equally important for increasing protection in the country, says Mahesh Balasubramanian, Managing Director, Kotak Mahindra Life Insurance. Balasubramanian, who says life insurance companies should start selling health plans, also spoke about combination licensing, individual risk identification, Bima Sogam, and fraud prevention.
The life insurance industry in India has come together to bridge the significant protection gap – the difference between available insurance coverage and actual needs in the event of the death of a policyholder – by organizing awareness campaigns and offering customers more flexibility in terms of coverage and method of payment. In an interview with MintReinsurance support and additional consumer health data that helps reduce friction around underwriting are equally important for increasing protection in the country, says Mahesh Balasubramanian, Managing Director, Kotak Mahindra Life Insurance. Balasubramanian, who says life insurance companies should start selling health plans, also spoke about combination licensing, individual risk identification, Bima Sogam, and fraud prevention.
Edited excerpts from the interview:
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Edited excerpts from the interview:
How can awareness about term insurance plans be increased, given that the life insurance protection gap in India is 87%, according to a recent study by the National Insurance Academy?
The industry needs to come together and start awareness campaigns where protection is a key topic so that customers can understand the products and create and meet natural demand. From a product availability perspective, it is a great fit along with flexibility at the customer level. Sachet products are available where insurance can be purchased at minimum premiums. Premium payments can be made monthly, quarterly or annually, while a policy for one, two or even five years can be purchased in one lump sum. Return of premium plans are very popular because they cater to the customer segment that wants something back if they survive the policy term. Our recently launched product Kotak TULIP also aims to provide high assured amount to customers as well as market linked returns.
What we also need to do is reduce friction around underwriting and increase capacity on the reinsurer side. So, better presence, products, awareness and reduced friction for purchasing insurance are all enabling the industry to focus more on protection.
What is your view of the vehicle license? Should life insurance companies be allowed to sell health plans?
It has two sides. First, everyone can do everything. It is definitely a solution to the low insurance penetration rate but we will have to wait and watch when the regulations will be amended and implemented. It is possible to reach a solution in the near term. Instead of manufacturing health plans, life insurance companies could at least be allowed to start selling them. We have to understand that insurance agent burnout is real. Their ability to survive does not improve because the average commission is not enough for their decent strength. If they can offer more products to the same group of customers from the same or complementary brand, it will help them achieve their viability. So we should definitely allow the distribution of health insurance products by life insurance companies.
What is the latest update on IRDAI’s proposal to increase surrender value for policyholders? What is your position on it?
The industry took until the end of January to respond to the proposal. The Life Insurance Council, which consists of all players in the life insurance sector, compiles the responses. While it is good for customers to get better surrender value, the entire concept needs to be understood from multiple angles – from products to risk management. There are a lot of things there. The Council will send its recommendations to the regulator.
What measures are you taking to increase insurance penetration in rural India? The latest Irdai report shows insurance penetration falling from 3.2% to 3% in FY23.
The insurance industry is trying to design a bundled product package to be offered to rural India with easily obtainable ticket sizes and in multiple units. This product will have a mix of life, non-life, basic fire insurance, etc. It will serve as an insurance package that meets the customer’s basic insurance requirements across all product categories that insurance companies can offer. Once the Bima Trinity (Bima Sugam, Bima Vistaar, and Bima Vahak) arrives, it will push the insurance scale. Implementation is not far off. It will be a game changer.
Apart from insurers, brokers, agents and other ecosystem players such as UIDAI, Insurance Information Bureau (IIB) and credit bureaus will also join the platform. So, where data is available, the idea is to build APIs and leverage the data to get enough information about the customer so that we can serve the customer better. It will basically be a giant platform where all the insurance services fraternity in different shapes and forms will be available on one platform. Naturally, all the products and services we offer will be streamlined and expanded over a period of time. One cannot say that everything will be available on day one. The idea is to make sure the key elements are in place and all players in the ecosystem start participating.
In statewide insurance, all insurance companies are tasked with working on insurance penetration. They are all talking to their state governments to roll out these products. The insurance industry is happy to fully embrace the account aggregation framework as well. One needs to know to what extent the account pooling framework is successful in terms of enrolling more customers and all banks providing more and more information after customer approval. Over the next couple of years, you will certainly see a significant improvement in the penetration of insurance products in rural India as these initiatives take off.
What is the industry doing to create a central database for risk management and fraud prevention?
The typical scams that keep happening are substandard lives that enter our system and file a claim immediately. Insurance is an industry of possibilities. We cannot fight against someone who comes with certainty that he will die in three or six months. Usurious entities are created. There are many cases where a person’s entire being has been falsified. We all work with the Insurance Information Bureau (IIB) and other data repositories where we can go and check for scammers. The way credit bureaus provide credit scores, insurable scores can also be calculated. We just need more data. Bima Sugam is a solution to scams as well. Once we reduce fraud, the benefit will be passed on to consumers.
The Irdai chief has talked about having an individual risk breakdown in premiums and not the group average. How will this be done?
It’s like having a personal designer. We need a lot of information to determine individual risks such as demographic data, a customer’s lifestyle and other purchases. Where does he work? What is his income? How many children does he have? What are its current policies? The more information we have about the customer, the better we can underwrite and offer personalized products. For example, if you have never had a health claim in the past 10 years, it means I live a healthy life. If you participate in marathons, this information tells me a lot about your health. We already have a dynamic risk model through which we score clients according to different criteria. Right now, we use it to get additional underwriting information, but tomorrow it could be used to determine individual risks.