The Covid-19 pandemic took a toll on new life insurance business in March as total new business premium declined 32.17%, compared to the year ago period. There was hardly any new business during the month because of the impending crisis, says Tarun Chugh, managing director and chief executive officer, Bajaj Allianz Life Insurance Company.
The Life Insurance Corporation of India (LIC) which accounted for 68.74% of the industry share in FY20, reported a 31.12% decline in new business premium last month. The balance 31.26% industry share, divided among 23 private life insurers, saw their total premium mop-ups in March fall 34.22%.
“We may continue to have a similar de-growth trend till there is clarity on how the lockdown phase pans out in the country,” adds Chugh, an insurance industry veteran, who has led Bajaj Allianz Life Insurance Company since April 2017.
In an email interview with Fortune India, Chugh shared his views on the adversities and challenges before the life insurance industry, and how Covid-19 dealt a big blow to the business. Edited excerpts:
How has the industry scenario changed after Covid-19 metamorphosed into a pandemic?
Given that the Covid-19 crisis hit in March, a key month for insurers, the impact has been significant and led to de-growth in the industry. The industry witnessed 32% decline in March. There was hardly any new business as there was an impending crisis, and people were not sure how it would pan out. We may continue to have a similar de-growth trend till there is clarity on how the lockdown phase pans out in the country.
Do you expect an asymmetric jump in the demand for insurance, in the backdrop of fear or awareness induced by Covid-19?
In April while there has been a slight increase in term and guarantee plans, as consumers are better understanding the need for these plans. If you were to see China, which is somewhat similar to India vis-à-vis life insurance, the uptick for term plans happened after 2-3 months of the crisis breakout.
While digital channels may be witnessing heavy traction, how much is the approximate growth seen in the channel. How does that compare to this period in the previous year?
Digitisation and virtualisation of processes and engagement has become a new reality for the industry, in these Covid-19 crisis times. While the agency channels are being trained and empowered on how to engage with customers on digital access points, banks are busy managing their customers and usual transactions rather than sell third-party products.
Online channels were contributing to business growth for the industry, as online unit–linked insurance plans (ULIPs) were becoming popular. If you were to see the online segment in today’s scenario - the traffic has increased. However, from a sales point of view there isn’t a strong growth as term plans are being sold and they typically have a small ticket size.
As far as digital sales and payments go, demonetisation was a major turning point for financial products and services companies. What kind of traction did you witness back in late 2016, and how do you relate that to the current scenario?
Payments – yes. Demonetisation helped push digital payments, but not sales as such. This was the case across the industry. You’d know how small businesses were impacted and this was because sales weren’t happening. I would refrain from painting today’s scenario and that of demonetisation with the same brush.
We are going through a completely different crisis. During demonetisation times physical meetings were happening. That has completely stopped now. Similarly, at that time certain businesses and global economies were not impacted.
Right now, this is a global crisis. So business and industry is feeling this impact. Today’s crisis management strategies are not what we used back then. In the new future, the Indian life insurance industry is going to make digitisation and virtualisation a reality, and permanent.
The latest budget offered tax payers to opt for a lesser tax rate on the condition of skipping exemptions, and insurance being one of them. Were you expecting some negative traction owing to the budget proposal, and does the Covid-19 pandemic push an individual even further to cover risks without an eye on exemptions or rate of taxation?
The new tax regime was introduced to ease processes. However, one must keep in mind that we have been a savings oriented society, and the government has incentivised this behaviour. The new tax regime was brought out for encouraging a more consumption–friendly society, keeping in mind the pre–Covid-19 times.
Today, we are looking at a new reality, and we are witnessing an increase in inquiry and purchase of term plans. So consumers may also be thinking beyond tax saving when it comes to buying life insurance.
