'Life Insurance: A Must For Every Person's Basket Of Financial Products'

Anup Rau, the young and dynamic CEO of Reliance Life has been instrumental in scaling up their business since he took over the reigns three and a half years ago. His astute leadership has led to a recent vote of confidence from Nippon Life - who recently increased their stake in the company by 23%. In this free-wheeling conversation with BW Businessworld, Anup talks about where we Indians usually go wrong with our Life Insurance Planning, where the need for adequate life insurance actually arises from, and what the industry needs to do to improve Life Insurance penetration among the masses.

Where do you feel we Indians typically go wrong with respect to our Life Insurance planning?
The most common mistake people in India typically commit, while evaluating Life Insurance, is to only use 'return' as a parameter and end up making inappropriate comparisons and therefore, incorrect decisions. Life Insurance is a financial product that has no other parallel in the universe of financial solutions; it is the only product that can transcend generations supporting the customer during his or her lifetime as well as their family even in the absence of the customer. Life Insurance is a highly underrated solution; not only is it the only product that combines Life Cover and Savings, it is also the only product that can guarantee both for a very long period of time while being tax efficient.

Most Indians tend to purchase Life Insurance as an investment, without properly understanding why they need to have an adequate life cover. What are your thoughts on this?
I completely agree, while it is a savings solution and does provide tax benefits, it is so much more - at its core it is a risk management solution. It allows customers to provide protection to their family against the risk of financial insecurity if they are not around to look after them and at the same time it also allows customers to save and create a corpus to support their dreams and take care of their retirement. Unfortunately, most tend to undervalue the life insurance protection aspect of the product; while aspirations are higher than ever and lifestyles are improving, so are the costs. Average life expectancy is also improving, however, it is unwise to leave the future of your family to chance and fate when one can protect it today; the older fallback-options of the joint family system are no longer available and customers have to be increasingly self-reliant. To put this into perspective; we should look at the amount of premium per day; we would realize that we end up spending much more on discretionary purchases and that it is a small amount to pay for the peace of mind and security that we would get.

A recent report suggested than Life Insurance penetration in India was at a 10-year low of 3.3%! What initiatives does the industry need to take as a whole in order to buck this disturbing trend, considering the catastrophic consequences of being under-insured?
Actually the Life Insurance penetration as per the latest Swiss Re sigma report is even lower - it is 2.6%; far lower than the level of 4.6% in 2010. While there are several initiatives that the Industry is already taking to address this fall, the fundamental reason remains the decrease in the number of people selling Life Insurance. The number of agents selling Life Insurance has declined by almost 1 Mn in the last 5 years; Bancassurance has grown but its presence remains stronger in the urban centers. With the implementation of open architecture this year, hopefully, a larger number of Insurers will have the opportunity to activate the banking network and thereby increase the distribution. However, unless we find a way to recruit quality people as agents and create an enabling ecosystem for them to sustain a long term career in the Industry, we will not realize the true potential of the Indian Life Insurance market. To make this a reality, regulations and policies will have to play a greater role; in the past few years agents have just seen their earnings declining and the market conduct rules becoming more stringent. While these are steps in the right direction, unless we also work on improving the demand or pull for Life Insurance, we are just making their work more difficult while reducing their earnings and this is the trigger of the continued attrition.

What would be the most important advice you would give our readers at BW Businessworld with respect to their own Life Insurance planning?
Like I said before, Life Insurance is a unique financial solution and therefore should be a part of every person's financial plan or basket of financial products. While buying Life Insurance; we should look at addressing two dominant needs - protection and long term savings. While deciding the adequate protection level for you or your family, one has to keep life stage, income, current expenses and liabilities and future goals and liabilities in mind. Most Life Insurers have online tools to help customers calculate this number. For long term savings requirement, identify the corpus you need to build to realize your long-term goals such as child's education and retirement. You should address at least a part of it through life insurance which is the safest, most secure and tax efficient way of meeting this goal. The Life cover under such savings/investment plans combined with that under a pure protection plan should be sufficient to address your protection needs.

Please tell us about some initiatives taken by Reliance Life to create awareness about Life Insurance and proper Financial Planning among the general population.
Most of our efforts are driven through our distribution, we have a large base of advisors and employees who meet potential and existing customers on a regular basis. We train them on need based analysis to ensure that before they get into what to buy and how much to pay with the customer, they make them first understand what they need. This will ensure that customers have complete clarity of the purpose of each product in their overall financial plan. We have online and offline tools to help our sales people and customers. We also use the digital and social media extensively to popularize our tools and calculators that help customers identify their needs better. Apart from these initiatives, we also take a lot of effort in ensuring that customers who do come to us, have complete understanding of the product they are buying and its benefits; we are the only Company to do a 100% recorded call verification to confirm all product and application details with the customer before processing it. Apart from this we have also taken several small steps like ensuring the SMS communicates the number of premiums to be paid, getting the customer to write down the purpose of purchasing the policy in the application form, printing a one-page leaflet covering key policy information in eight vernacular languages along with the policy document for an easy read and reference etc. So across all our initiatives we are trying to ensure that not only do customers understand the need for Life Insurance, they also buy it for the right reasons.