We Expect A Strategic Need Towards Tailor-make Protection Solutions: Ashish Vohra

Tell us a bit about your recently launched Digi-Term product.

Reliance Nippon Life Digi-Term Insurance Plan is a feature rich term insurance product offered exclusively through online platforms. This product has been crafted specifically to meet the protection requirements for customers at different stages of life and risk cover preferences. As an additional benefit (at no extra cost), the Digi-Term plan comes with a built-in Terminal Illness Benefit that pays 100% of the sum assured on Diagnosis of the Life Assured as terminally ill.

A terminal illness is a medical condition in which doctors certify that the patient is unlikely to survive beyond a defined period. Our terminal illness benefit is very liberally defined (12-months survival) which offers the life assured to use 100% of the sum assured towards either availing the best possible treatment or completing the financial planning for their family. The standard terminal illness benefit available in the market is quite narrowly defined with only a six-months survival clause. 

Why do you believe that it was relevant to launch this product at this point in time?

Over the last few years the awareness around the need for protection has grown exponentially. Consequent to such increased awareness, the online pure protection market has grown significantly and there is far greater recognition for the need for an all-round protection cover. We now see far greater awareness and demand across a much wider age group (between 25 to 55 years) than earlier (30 to 40 years).

Given its attractive price points, the plain vanilla pure protection term plan still draws considerable attention. However, we see foresee a gradual shift away from a one-size-fits-all strategy as the protection market matures. We expect a strategic need towards tailor-make protection solutions to the varied needs of a target group that is expanding at both ends of the age segment. At a younger end of the age spectrum, we see a clear preference for pure protection-oriented products, while at the mid-segment we see a preference for covers that take care of large liabilities (such as home loans) while also providing for an income replacement for the family, and at the older age we see the emerging need for leaving behind a tax-free legacy for the next-generation. Our product aims to address the clearly differentiated needs of different segments through five different variants embedded in the plan.

How is your Terminal Illness benefit different from the others on offer in the market at this time?

Unlike some of the terminal illness benefits offered in the market, the Digi-Term plan comes with a built-in Terminal Illness Benefit that pays 100% of the sum assured on diagnosis of such an illness. We have simplified not only the criteria that defines terminal illness, but also the claims process that renders the terminal illness claims process easier, faster and more effective.

Our terminal illness claims process requires supporting reports and certificates from two doctors (treating doctor and consulting doctor) for accepting such a claim. We define a terminal illness as a state where patients are expected to survive no longer than 12 months as opposed to six months survival offered in the traditional terminal illness benefit offered in the market currently. 

Tell us a bit about the five variants of this plan. Is it true that a customer can increase his or her sum assured value without new underwriting, and at no incremental cost? How does that work?

The Digi-Term plan represents a departure from the classical plain-vanilla product approach. This plan provides flexibility to the customer to opt from a range of five variants as per their life-stage insurance needs. The plan offers the option of having (1) the flexibility to increase the cover on changes of life stage (marriage and parenthood), or (2) Increase the cover by 5% each year, or (3) have a monthly pay-out option for 10 years, (4) receive return of premium, or (5) cover until end of life.

How does the policy’s pricing compare with term plans on offer from other market leaders today?

The premiums of Digi-term have been kept at a competitive level as compared to the other online term insurance plans available in the market today, including term plans being offered by the market leaders. However, the product is quite differentiated from competition and therefore a like-to-like comparison may not reflect a true price competitiveness. However, from a pure pricing perspective, our product would feature in the top quartile in the industry.

What does the IRR of the return of premium variant work out to? Is it advisable to go in for this option?

The return of premium option is akin to paying a rental deposit that comes back intact at the end of the rental period. In case of our return of premium option, there are two options, one where 50% of the premium is akin to the deposit and the other half akin to the rent. The customer enjoys the advantage of a net effective lower premium by opting for the 50% return of premium. 

The other return of premium option offers 100% return of premiums at the end of the policy term effectively creating a plan that is akin to making a deposit for life insurance cover.

The term return of premium option offers distinct advantage to customers in their middle ages who would like to build a corpus while still ensuring a safety net for their family. The plan enjoys distinct tax advantage while reducing the effective cost of cover.

What trends do you foresee in the life insurance space, particularly with respect to pure-risk plans, playing out over the next five years?

India features among one of the nations with the highest “protection gap” as per a recent reinsurer survey. This “protection gap” is defined as the difference between the “resources needed” and the “resources available” for dependents to maintain their living standards following the death of a working family member. India currently has a “protection gap ratio” of 92.2% (i.e. an average household will need 92.2% more resources to financially cope up with the death of working family member). The corresponding figure for Asian counterparts likes Japan, Taiwan and Singapore are at 56.3%, 16.4% and 56%, respectively. We therefore foresee, that in the near-term, strong pull-type market forces will narrow this gap through protection-oriented insurance covers.

We are also witnessing demand for term plans that cover pre-existing diseases. While, such products are available through group term covers, this feature is not being readily offered through individual policies without significant additional rate-up.

As the current young population of India ages there will be significant demand originating from relatively older population. As a result, the market will need to offer affordable and differentiated proposition for the middle-aged population. We believe that this will emerge as a prominent target group over the next 5-10 years.

Given the risk associated with the product and the price sensitivity, technology led innovation in risk-management will play a crucial role in driving market penetration. We see a clear trend in data analytics leading to not just creating individual personas but also assessing risk profiles at individual level. This, we believe will help in creating ever-shrinking risk-cohorts that can be finely priced for superior risk management and price competitiveness.