Sandbox in insurance sector (in India) is a much-talked about and awaited concept. While many countries have adopted it already, in India it is still work in progress. But with new proposed regulations in terms of flexibility in premium paying term, policy term etc, the right tone is expected to be set for the sandbox concept, said V Viswanand, deputy managing director, Max Life Insurance, in a discussion with FPJ's Jescilia Karayamparambil.
What discussions are on around much-talked about sandbox for the sector?
The concept of sandbox is in advanced discussion stage and guidelines from the IRDAI are be expected. There is a sub-committee that is looking into it, along with constant inputs from all insurance players. While this discussion is on, there is another big change that can be expected in the near future and is likely to consume bandwidth of insurers’ products teams right through the next four-six months.
The regulator proposes significant flexibility in existing and new products for the customers—such as change in premium paying term or policy term, increase in policy revival period, option to reduce premiums beyond five years, settlement options and earlier surrender values. This will improve customer retention. Some positive changes are expected in retirement products too – such as higher commutation value, open market annuity option up to a limit, are proposed and these are most welcome. We hope these regulations come in place soon. The sector is already witnessing a ‘second sunrise’ of sorts, and these positive changes are expected to enhance the growth of insurance in India.
At present the sandbox concept has not taken off, how soon do you think other proposed regulatory changes will be implemented?
All these proposed changes in the product space are likely to be done in the next few months, and certainly before the end of the financial year. It is positive news for the sector. There are proposals to improve penetration of protection products and pave the way for product innovation in this respect. For instance, as the regulator is set to permit below one year term products in the protection space in the new products regulations, it will be a right build up to the sandbox.
Is Max Life planning to introduce new products this year?
At present, we are focusing on shaping our existing products, post the implementation of the regulations.
With change in regulations, how many new products refiling can be expected?
This year 24 companies will have to modify around 400 products. It is expected that half or more of these could be filed through the minor modification route.
Do you think flexibility will push penetration of insurance to 6 per cent?
No, this will only help increase the penetration of insurance by 0.5 per cent. For 3.5 per cent to become 6 per cent (or double), the key for insurance market is to grow number of agents. India's population is similar to China. But in case of agents, China has around 80 lakh and India has around 21 lakh agents.
Is the industry lagging somewhere?
Everyone is doing everything they can but low margins is keeping these agents away from insurance business. The commission offered to these agents is lowest compared to rest of Asia. Regulator can be an enabler here (by revising commissions).
If India needs to catch up with rest of Asia, all holy cows should be questioned. If you look at some of the proposed regulations, those were unthinkable 20 years back, but today the industry is matured which has lead to such regulations.
How important is taxation system in increasing insurance penetration?
Taxation can play an important role. In countries like Japan, which is far more developed than India, have a separate tax bracket. They offer tax benefits if you are investing in any life insurance or retirement scheme (developed by insurance companies). India does not have anything exclusive to insurance.
The change in taxation system is an immediate change that is required and we have been requesting the government for this change for quite sometime. There has to be a pull created by the regulator and government. At present, agent is doing push business. If there is a dedicated insurance quota, it will help India save and secure themselves for future.