Balanced exposure to equity and debt product range will be more popular over the next 12 months: Amit Palta, ICICI Prudential
The pullback from the third wave gives us the confidence to end the year very strongly in March, he said.
The Covid third wave pullback gives ICICI Prudential Life Insurance the confidence to close the financial year ‘very strongly’ in March 2022, although the company’s new business premium has seen a year-on-year decline. another in February, says the director of distribution Amit Palta. In an interview with Mithun Dasgupta, Palta said a balanced exposure to the equity and debt product line is likely to be more popular over the next 12 months as markets remain low in volatility. Edited excerpts:
ICICI Prudential Life’s new business premium was up 18.11% year-over-year through February this fiscal year. However, it saw a decline of 22.84% year-on-year 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, channel partners and employees were all affected . Given these operational challenges, new business premiums for February were down. The decline of the third wave gives us the confidence to end the year very strongly in March.
In a context of market volatility, clients were a little reluctant to opt for unit-linked products in February. Has this had an impact on the business growth of the company? Generally, sales of ULIP products increase in March. What is the current trend right now?
The story of life insurance has shifted from saving taxes to achieving life goals. Customers buy life insurance savings products to achieve long-term financial goals while providing financial security for loved ones. Our innovative ICICI Pru Signature ULIP product, which reimburses all costs to customers, offers an attractive proposition to customers. Additionally, the Systematic Withdrawal Plan or SWP feature can enable clients to receive regular income in retirement. Historically, March tends to be the strongest month in terms of new business. And, as we emerge from the current wave of the pandemic, we are confident that we can continue the growth momentum.
Has the company increased premiums for term insurance plans? Will it go for another premium hike in the future?
We work with our reinsurer partners to provide guarantee agreements for the risk we accept. With their larger balance sheet, we are able to reduce the impact of loss volatility on us. The price of term insurance depends on the target segment and the onboarding process. After the recent changes in reinsurance pricing, we have been able to offer competitive rates to our customers, with no price change in the upper sum assured bands and with a slight change in the lower sum assured bands.
What proportion of the company’s total weighted premium received (WRP) comes from annuity products?
It varies from 5% to 6%. Of course, this is different from our channel-to-channel view. Some channels have a higher share of annuity business, but at the enterprise level we’re close to around 5% to 6%. We have created many variations within our annuity products. Pensions or total pension assets under management are extremely low as a percentage of overall GDP in India. It’s close to about 3-4%, which is nothing. And, it’s probably the lowest in the world and the awareness of creating a surplus of post-retirement income generation is at a very, very nascent stage. There is a lot of work that the Pension Funds Regulatory and Development Authority (PFRDA) is doing to raise awareness and encourage people to plan for accumulation. Similarly, almost any life insurance policy on the savings side can be considered a product where you can accumulate a lump sum to start generating income for you. And, I believe that not just ICICI Prudential Life, but the entire insurance ecosystem will need to work together to improve this current penetration and reduce dependency in today’s nuclear family environment. There are some industry enablers, which of course will be necessary because, as you know, in annuity there is almost like double taxation because you are investing in an annuity from your taxable income. And then, when you receive an annuity, you are taxed again.
For the next fiscal year, what are, roughly, the product categories that you think will drive business?
I believe one of the segments that we opened up in protection, which is premium return, improved our ability to go beyond just affluent clients where we were best positioned through our term plan in the past. Very recently, we launched our premium product return, ICICI Pru iProtect Return of Premium. The range of guaranteed products will also continue to maintain good momentum and I am convinced of that. The products linked to the market depend on the vagaries. But the kind of outlook that I have over a period of the next 12 months, the markets will remain little volatile and therefore may rise and fall little and so we will see how that evolves. But I think balanced funds or balanced exposure to the equity and debt product line will likely be more popular over the next 12 months.