B&E: Ever since the insurance market opened up in India, the insurance industry has shown impressive performance. But does this mean that insurance penetration in India is also improving?
Rajiv Jamkhedkar (RJ): The penetration levels as a percentage of GDP has constantly been increasing in India ever since the insurance sector opened up to private players in 2001. From levels of 2%, it has grown to around 4% in FY2012.
B&E: Lack of consumer awareness is one of the major challenges in the growth of insurance sector, especially, for the innovative specialised products. How can one educate consumers about the benefits of such products?
RJ: You need to make a concerted effort to educate customers about the importance of life insurance. There are various ways and means through which one can do it. We at AEGON Religare Life Insurance have a vision to help people plan their life better. And this translates into educating the consumer on what is right for him.
B&E: What is your take on market-linked insurance products, people who are looking to club insurance with investment?
RJ: Unit linked insurance plans or ULIPs are bought for all the wrong reasons. One of the misconceptions that exist in the market today is that ULIPs are linked only to the equity markets and hence are an investment tool. ULIPs are available across equity, debt and money markets to provide choice and flexibility to the customer, depending on the appetite for risk. ULIPs afford a very good opportunity to plan for the long term. As an asset class, ULIPs offer the benefits of life cover, provide a long-term perspective to systematically save for financial goals, while offering a great deal of flexibility and control.
B&E: Is there a standoff between the mutual fund and insurance industry on the issue regarding mutual funds that are offering insurance as an added benefit?
RJ: Life insurance means long-term protection and savings. Mutual funds amount to investments mainly in the short-term. In any portfolio, it’s not either/or for life insurance and mutual fund. One should have a mix of both in his/her portfolio.
B&E: Though risk management should be the first and the foremost objective for buying insurance, how important a tool it is for financial planning?
RJ: Risk management is absolutely essential for financial planning. As a tool for risk management insurance it not only helps protect one’s family against any future unfortunate event, but also helps toward systematic long-term savings for a particular goal. Also financial planning is done for oneself and for one’s family. Thus risk management tools like insurance helps one protect his/her family against any misfortune (like some financial crisis) and helps individuals sustain their lifestyle for a certain period of time till they become financially independent.
B&E: How different is insurance selling in rural areas? Can you elaborate on your rural strategy?
RJ: The dynamics of the rural market are completely different. The biggest challenge in these markets is to create a need and understanding for life insurance. It is also an extremely price sensitive market. Therefore, pricing of a product is an important aspect. We have tie-ups with NGOs who will help spread the message on the need for life insurance in the rural markets.
