Regulator Adopts Risk-based Capital Regime To Enhanced Risk Management: Dhiren Salian, ICICI Pru Life

How was the year 2023 for the insurance sector? What major changes or implementations has the sector noticed, and how have these developments shaped its landscape?
The Indian life insurance sector is on an upward trajectory, driven by a growing economy, rising per capita, growing awareness and life insurers leveraging technology to enhance customer experience. 

Facilitative regulations have been rolled out to achieve the Regulator's vision of ‘Insurance for All’. The regulations are aimed at improving the ease of doing business. For instance, ‘Use and File’ has significantly enhanced the go-to-market time, enabling life insurers to cater to the changing preferences of discerning customers. The Regulator has also taken steps towards moving to a risk-based capital regime, enabling companies to appropriately manage risks and ensure optimum utilisation of capital.

How do you think Bima Sugam (IRDAI) will change the way people buy insurance policies or claim on them?
Bima Sugam is envisioned as a unified platform designed to offer comprehensive solutions to purchase insurance, conduct service transactions, and settle claims. It aims to simplify and make life insurance easily accessible to a larger section of the country’s population.

In order to simplify the customer onboarding process on this platform, it is also proposed to have integrations with various external ecosystems such as Aadhaar e-KYC and CKYC for quick identity verification, account aggregator for financial underwriting and Ayushman Bharat Health Accounts (ABHA) for medical underwriting and claim settlement. Ultimately, Bima Sugam could serve as a one-stop destination for varied segments of customers to meet all their insurance needs.

How do insurance companies inform customers and stakeholders about new regulatory changes and what initiatives have been taken to enhance insurance awareness?
Insurance companies provide disclosures to policyholders, ensuring they are aware of changes that may impact their policies. Customer communication is sent using various modes, such as emails, SMS, and letters.

At ICICI Prudential Life, we run various customer communication campaigns regularly to keep customers updated on the benefits attached to their policies. Also, we implement campaigns to educate customers on the importance of appointing a nominee, besides nudging customers to reinstate their lapsed policies.

What is the impact of the Union Budget provisions that make insurance proceeds on premiums exceeding Rs 5,00,000 per annum taxable?
The latter part of FY2023 saw increased interest in non-linked policies due to customers seeking to capitalize on tax benefits. However, as of FY2024, there has been a noticeable shift in customer preferences towards ULIP and participating products.

Notably, the industry has continued to grow irrespective of these changes. On a Retail Weighted Received Premium (RWRP) basis, from April 2023 to November 2023, the overall industry grew by 7.1 per cent. Specifically, the private sector grew by 11.3 per cent, which suggests that more and more consumers are appreciating the importance of life insurance as part of their financial portfolio.

How has ICICI-Prudential Life embraced technology to enhance customer services and operational efficiency?
We began our digitalisation journey over a decade back in 2011 and have continued to deliver superior experience to our customers. Our digital enablers, such as WhatsApp, Chatbot, Mobile app and website, offer on-demand service to customers. Due to the convenience provided by the mobile app, one out of every 3 service transactions is executed through it.

Advanced machine learning models have been deployed to predict customer persistency behaviour, thus helping our touch-points deploy nudges towards appropriate interventions and enabling the Company to ensure customers remain committed for the long term and enjoy product benefits. This has had a positive impact on our persistency too.

Additionally, our Optical Character Recognition solutions have enabled us to quickly process claims, with the average turnaround time to settle genuine death claims for FY2023 being just 1.2 days.

How does one select the right life insurance coverage amount?
Term insurance plans, also known as income replacement plans, ensure the family is not financially vulnerable in case of the demise of the earning member. To arrive at the optimum quantum of life cover customers can follow the Human Life Value concept. Based on this, it is recommended that earning individuals in the age group of 30 to 40 years should have a life cover of 20-30 times annual income, in the 40s a cover of 10-20 times and in the 50s a life cover of about 5-10 times annual income is advisable.

Today, innovative term plans provide individuals with an income option feature enabling the nominees to receive the claim amount as regular income rather than a lump sum. 

Buying life insurance early in life has its benefits. What advice would you give to first-time life insurance buyers?
Life insurance serves the core societal needs of protection and long-term savings. Buying early means a lower premium, which remains constant throughout the tenure of the policy. Embarking on the corpus-building saving journey early enables individuals to derive significant benefits from the compounding effect and achieve their financial goals.

It is important for customers to pay attention to the claim settlement ratio, which is disclosed quarterly, as it is a strong indication of a company’s efficiency in settling claims. Customers should also assess the ease of buying and the robustness of the digital platform to conduct self-service transactions. 

Looking ahead, what are your expectations for 2024, and what trends do you anticipate will continue to influence the insurance industry?
The insurance industry is undergoing a shift towards digital-first business models. Technology is playing a pivotal role in simplifying products, processes and delivery mechanisms and providing customers with a delightful experience.

With the growing trend of nuclear families, changes in prices and processes and growing consumer awareness, the retail protection segment has started to exhibit growth. For instance, during the period from January 2023 to September 2023, ICICI Prudential Life registered a year-on-year growth of 56 per cent in its retail protection new business Annualised Premium Equivalent. Given the under-penetration, this segment offers significant growth potential. 

As consumers recognise the importance of retirement planning, we believe this segment too offers untapped opportunities.