This year may be worse than the last for insurance industry

The insurance industry is undergoing regulatory changes at a fast pace. While the moves are customer friendly,the industry feels that it is unsettling the sector

The insurance industry is undergoing regulatory changes at a fast pace. While the moves are customer friendly,the industry feels that it is unsettling the sector. GV Nageswara Rao,MD amp; CEO,IDBI Federal Life Insurance,in an interview with Sandeep Singh said that this year may be worse than the last one. Excerpts:

How would you react to the budget proposal to increase life cover multiple to ten times of premium paid in order to qualify for tax benefits? Are you restructuring the old products?

It is a major change and it has given very less time to the industry to adjust. All of us are asking for some time to be given in order to redesign the product. A large percentage of sales around 55 per cent that were taking place in the industry,now,do not qualify for tax benefits and therefore we are faced with the challenge to migrate nearly half of our sales to products that qualify for such benefits.

Typically,short-term premium payment plans dont have ten time multiple and only long-term plans have that. So,the customers will have to be migrated to the long-term products and we will have to redesign those products and we are working on both.

By when do you think the redesigned products will be available to customers?

As of now we are in the process of doing so and we have yet to go to IRDA for their approval. I think that a minimum of six months from now will take for these redesigned products that qualify for tax benefits to be available to the customers as all those products in the industry are to be redesigned.

How fair is it to migrate customers from one kind of product to another and how are the sales getting affected?

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Actually the tax issue is unnecessarily discriminating or compelling people for go for long-term products,although some customers may find short-term product more suitable and affordable. It is more about the suitability of the profile of the customer. Unless the customer has the ability,it is not advisable to sell a long-term product to them. But till such time that the short-term products are redesigned,the entire segment will remain unserved.

2011-12 has been the worst year ever for the industry as it witnessed de-growth. Do you see any signs of revival?

Last year the regulatory changes resulted into de-growth in the industry and it really unsettled the industry. I would say that the changes brought about in the budget will unsettle it again. So,we dont know if last year was the worst. This year may be even bad as sales of products that accounted for 55 per cent of industry sales are not happening as of now and they are still being redesigned. If the whole thing is going to take several months then you have lost that period of business from the customers.

What do you think is the solution for the insurance industry?

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I think regulatory regime should make it conducive for all products being sold,because otherwise certain products will not be available to the customers. For example,NPS is a good product but it is not made available to the customers.

The industry requires stable regulatory environment for it to get back on track. For now there are too many unsettling changes happening at rapid pace and therefore the indutry is constantly faced with new challenges of adjusting because of which growth is impacted in a big way.

Also the regulations should not be looking at impacting commissions.