The receding third wave gives us the confidence to close the fiscal year in March very strongly, he said.
Receding Covid third wave gives ICICI Prudential Life Insurance the confidence to close the financial year in March 2022 “very strongly” although the company’s new business premium registered a year-on-year decline in February, says chief distribution officer Amit Palta. In an interview with Mithun Dasgupta, Palta says balanced exposure to equity and debt range of products will probably be more popular in the next 12 months as markets will stay little volatile. Edited excerpts:
ICICI Prudential Life’s new business premium grew 18.11% year on year up to February this fiscal year. However, it witnessed a 22.84% y-o-y decline for the month of February. What are the reasons behind this? What is the outlook for the fourth quarter?
Insurance sales have a long lead time and the emergence of the third wave of Covid-19 in January 2022 impacted sales development activities, as customers, distribution partners and employees were all affected. Given these operational challenges, new business premium for February showed a decline. The receding third wave gives us the confidence to close the fiscal year in March very strongly.
Amid market volatility, customers were a bit reluctant to opt for unit-linked products in February. Did that impact the company’s business growth? Generally, sales of ULIP products rise in March. What is the current trend now?
The life insurance narrative has changed from tax-saving to achieving life-goals. Customers buy life insurance savings products to achieve long-term financial goals while providing financial security to their loved ones. Our innovative ULIP product ICICI Pru Signature, which returns all charges to customers, provides an attractive proposition to customers. Also, the Systematic Withdrawal Plan or SWP feature can enable customers to receive regular income on retirement. Historically, March tends to be the strongest month in terms of new business. And, as we ease out of the current wave of the pandemic, we are confident that we can carry the growth momentum forward.
Has the company raised premiums for term insurance plans? Will it go for a further premium hike going ahead?
We work with our partner reinsurers to provide backing arrangements for the risk we onboard. With their larger balance sheet, we are able to reduce the impact of the volatility of claims on us. Term insurance price is a function of the target segment and the onboarding process. Post the recent changes in reinsurance pricing, we have been able to offer competitive rates to our customers, with no change in prices in the higher sum assured bands and a small change in the lower sum assured bands.
What proportion of the company’s total weighted received premium (WRP) comes from annuity products?
It ranges from 5% to 6%. Of course, it is different from our perspective of channel to channel. Some channels have a larger share of annuity business, but at a company level we are close to around 5% to 6%. We have created many variations within our annuity products. Pensions or total assets under pension management are extremely low as a percentage of overall GDP in India. It is close to around 3% to 4%, which is nothing. And, this is lowest probably in the world and the awareness on creating surplus of your income generation post retirement is at a very, very nascent stage. There’s a lot of work that the Pension Fund Regulatory and Development Authority (PFRDA) is doing in generating awareness in getting people to plan for accumulation. Similarly, almost every life insurance policy on the saving side can be seen as a product where you can accumulate for a lump sum to start generating income for you. And, I believe that not just ICICI Prudential Life, but the entire insurance ecosystem will have to work together to improve this current penetration and reduce dependence in the current nuclear family environment. There are some industry enablers, which will, of course, be required because as you know in annuity there is almost like a double taxation because you invest in annuity from your taxed income. And then when you get annuity, you get taxed again.
For the next fiscal year, broadly what are the product categories that you expect to drive business?
I believe that one of the segments that we have opened up in protection, which is return of premium, has improved our ability to go beyond only the affluent customers where we were most appropriately positioned through our term plan in the past. Very recently we have launched our return of premium product, ICICI Pru iProtect Return of Premium. Guaranteed range of products will also continue to hold a good momentum and I do believe that. Market-linked products depend upon the vagaries. But the kind of outlook that I have over a period of next 12 months markets will stay little volatile and hence may go little up and down and hence we will see how it moves. But I think balance advantage fund or balanced exposure to equity and debt range of products will probably be more popular over a period of next 12 months time.
