The surge in Covid infections in the second wave of the pandemic is likely to impact the life insurance sector in terms of new business, renewals, the persistency, claims, said Vighnesh Shahane, Managing Director and CEO, Ageas Federal Life Insurance. In an interview with BusinessLine, he outlined plans for the year and said the company will focus on distribution. Edited excerpts:
What are the prospects for life insurers given the impact of the second wave of Covid-19?
The first wave was an unknown entity and the worst we thought would be a lockdown and that economic mobility and the economy would be impacted. So we braced up for a loss of livelihood, lesser premium, lesser renewal and a little increase in mortality. This time around, its more lethal, and it’s going to impact the economy. It will impact the new business, renewals, the persistency, claims of insurance companies — life and health will go out of the roof.
With rising deaths, how will it impact the life insurance sector in terms of claims?
In the first wave, for our company at least, the mortality was in range. Mortality also depends on the lines of business, the market, the channels and the products offered. We were pretty conservative as we were not in the group business for term policies, we had withdrawn some products for adverse mortality experience. For example, we are not in the PM Jeevan Jyoti Yojana as we are not sure of the mortality. This time, the pandemic is impacting a younger cohort. And the infection and deaths in some of the markets where we are quite aggressive, like Kerala, Delhi, Mumbai and UP is picking up. I would expect our mortality claims to also spike. As of now, there’s no evidence. We’ve been tracking the second wave separately and internally.
What has been your total Covid claim?
Our total claims net of reinsurance for 2020-21 was about ₹84 crore, out of which Covid related was exactly 25 per cent at ₹21 crore. That’s representative of the industry. This wave, it could be a little more.
Going forward, what is the company’s strategy in terms of growth and products?
We just declared our results and we did well across all parameters, except topline to an extent. We did reasonably well in topline also but maybe not as well as three to four years ago when we had the full muscle of IDBI Bank. Our strategy would be to keep doing what we are doing well and spruce up our distribution. It could be a new banca partnership. Also, a focus on scaling up proprietary channels like agency, group, online, direct sales team. So the focus should be on distribution.
What is your distribution mix?
About 80 per cent is banca, out of which 99 per cent would be Federal Bank. Of the remaining, 10 per cent is agency, five per cent is direct sales and five per cent is group, online, brokerage.
Do you expect the demand for protection and term products to continue?
Protection products would be a focus because not only is there customer demand, but it’s also a very profitable product from an insurance company perspective. Our focus has always been on a balanced product mix. There is a segment of customers, especially Kerala and the HNIs who prefer ULIPs, and there are some lower end customers who take safety and prefer guaranteed returns, non participating guaranteed returns plans.