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Interview | Term insurance plans are still cheap in India: Vignesh Shahane

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  • Rising claims have led to a 20 to 50% increase in global reinsurance rates

Mumbai China’s epidemic of the virus Kovid-19, which has affected millions of people around the world, including India, has led to a sharp rise in insurance claims, with global reinsurance rates rising by 20 to 50%. This has also affected the life insurance industry in India and here too the rates of term insurance premiums can go up by 20 to 25%. Vignesh Shahane, managing director and CEO of Ageas Federal Life Insurance, says term insurance plans in India are still very cheap despite the increase in rates.

Health and life insurance awareness has risen sharply since the Covid crisis. With over 1 million customers promoted by Europe’s insurance conglomerate Aegis and Federal Bank of India, Aegis Life Insurance is seeing a high growth of 40%. Insurance veteran Vignesh Shahane had a detailed discussion with Commerce Editor Vishnu Bhardwaj on the changing nature of the insurance industry, insurance rates and company growth. Here are its highlights:

What are the major changes in the insurance industry over the years?

It is a fact that in the last two years after the Kovid epidemic, awareness towards health and life insurance has increased a lot. Earlier life insurance had to be sold by explaining to the people, but now people have understood its importance and are coming forward and taking out insurance themselves. Covid was bad news, but it has accelerated the growth of the insurance industry. All costs were reduced in the meantime. With ‘India’, the insurance industry also became increasingly digital. In addition, the insurance regulator IRDA has taken a number of commendable steps. The Indian economy also progressed again. For all these reasons, the demand for insurance is increasing. However, insurance claims are also on the rise.

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How much is the increase in insurance claims and term insurance rates?

Death insurance claims increased 3 to 4 times during the Covid period. Now the claims are also increasing due to non-covid i.e. other serious diseases and road accidents. This has led to an increase in the cost of insurance companies and a 20 to 50% increase in re-insurance rates globally. However, Indian insurance companies are increasing their rates by 20 to 25% while bearing certain costs and even after this increase, term insurance plans in India are still very cheap.

Which type of insurance plan is currently in high demand?

It is as if people are now worried about their health and life. In this age of uncertainty people want a good and fixed income for the future i.e. even for retirement. Therefore, the demand for Unit Linked Plans (ULIPs) and Guaranteed Income Plans along with Health and Term Insurance is highest. The attraction of ULIPs has increased due to the rise in the stock market. One of the great features of ULIP products from an investment standpoint is that they give the insured the option to switch between equity largecap, midcap funds or bond funds without any tax and switching charges, giving a better return on his investment. ULIPs and guaranteed income plans used to sell 20% to 20% of total insurance sales before Covid, but now both sell at the same rate i.e. 45-45%.

How much growth does Aegis Life expect this year and what new plans to launch?

We are recording a growth rate of 35-40 per cent over the last two years with an industry growth rate of 15-20 per cent and we expect 50 to 60 per cent growth this year. We are benefiting from our new promoter Federal Bank’s network of over 1800 branches spread across the country. At the same time we are increasing the number of branches of Aegis Life from 64 to 100. To strengthen the agent network, the number of agents is doubling, from the current 12,000. We’ll be launching a new online term plan and delayed annuity plan soon.

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