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Budget WishList of Mr Venkatesh Mysore, MD,
MetLife India Insurance
What is your Wish List from Budget 2005-06 for
the insurance sector?
We are looking forward to the hike in FDI from 26% to
49% that was announced in the earlier budget so that MetLife
can invest more and increase its stake in the Indian venture
as well.
The second issue is taxation. Some of the key recommendations
with regard to Section 88 benefit and 80CCC benefits should
be taken into account because this is an young industry
and there have to be ongoing incentives for customers to
save and self insure.
Particularly in the absence of any kind of meaningful social
security programme in India, the Govt. should encourage
individuals to self insure and one of the ways this can
be done is by providing tax incentives.
Our third wish would be the revamp of the Insurance Act
although it is not really a budgetry issue. There are several
antiquated sections in the Insurance Act which have no relevance
any more due to changing circumstances. So those need to
be rationalized and revised to be able to facilitate the
growth of the insurance industry.
Overall, what are your hopes from the Budget for
the economy?
Two of the things that come to mind from the economy stand
point are firstly as a country and as an economy. It is
important to bring down the fiscal deficit which could otherwise
have a very negative impact on the financial conditions
of the economy.
The second issue would be to ensure that there are sufficient
investments taking place particularly within the infrastructure
area for the growth and development of the economy. Related
to that would be liberalisation of the investment regime
both on the FDI and the FII areas so that the much needed
investments come in particularly to areas that are long
term in nature.
Unit Linked products are the rage today. Why is
it that MetLife prefers to stick to traditional products
and not go the unit linked way?
Unit Linked products are very good products and personally
I am a big fan of unit-linked products. MetLife sells unit
linked or 'universal life' as we call it in various markets.
However, one of the reason why as an organisation we have
been very careful in introducing these products is that
we see the inherent risks with unit linked.
There is a large untrained and largely part time agency
sales force in India today which is going out and selling
unit linked plans without knowing the ramifications of their
sale. In many countries where unit linked products are very
popular, there are strong regulations to back it up in terms
of sales practices and disclosures to customers.
And they involve, for example, things like giving prospectus
to the customers first and getting separate forms signed
by the customers that they understand the key features of
the plan and the risks associated with it. This is one of
the reasons why we have been very careful in introducing
unit linked and promoting that.
Having said that, MetLife recently introduced Met Smart
which is our variable universal life or unit linked life
insurance plan and Met Advantage which is our variable annuity
plan or unit linked pension plan. The way we are going about
this is by ensuring that we have a very strong internal
training programme/certification programme which we have
designed and executing voluntarily. This is a 3 day programme
that all agents who intend to sell this product have to
go through.
Only if they successfully complete this will they be allowed
to go and sell this product. The reason for this is we want
to ensure that the agent understands the unit linked product
well so that they are in a position to explain this to the
customers in all its features and the risks associated with
unit linked. I don't believe many of the agents and customers
today understand that the entire investment risk is passed
on to the customer, and how long their life insurance stays
in force is a function of what their investment fund is.
As a result it comes as a rude shock to people who don't
understand the impact of the fluctuations and the inherent
dangers associated with this especially at a time when they
probably would need their insurance the most. This will
create tremendous amount of chaos in the market place as
the market fluctuates.
On the other hand our belief is that a well informed and
a well trained agent explains all the aspects of the particular
plan in a way that the customer can fully appreciate and
understand the plan and if in spite of it they purchase
it the chances are that even if the markets fluctuates the
customers would understand why this is happening because
hopefully they would have bought a product that they really
need.
Mutual fund companies have been stating that insurers
have been encroaching into their territory by selling unit
linked products. What is your view.
The mutual funds industry for the first time is facing
competition in the space of market linked plans and in all
honesty a mutual fund and a life insurance policy is not
a life to life comparison because the life insurance policy
obviously has a certain mortality element to it which has
its own internal costs and there are certain administrative
charges that go with it.
On the other hand a mutual fund is primarily an investment
product and therefore it would not be appropriate to compare
it on a like to like basis. However, there are several advantages
of separately buying mutual funds as there are for buying
life insurance. Our approach has been that agents would
have to first determine that the customer has a life insurance
need and only then provide a solution, whether it is a unit
linked or a traditional product as the case may be . So
there is no question of a direct competition because a mutual
fund and unit linked life insurance are very different types
of products and cater to different type of needs.
Should there be more transparency in case of unit
linked products as related to charges?
Absolutely. I do believe that the companies have structured
it in a transparent way. However the crux of the issue here
is to ensure that the intermediaries are able to explain
the product in a way that the customers fully understand
and appreciate the various moving parts of a unit linked
product whether it is the mortality costs or the administrative
charges or how the investment fund works.
What innovative products do you plan to come out
with in the future?
On of the innovations that MetLife has already implemented
is Met Ultimate which is primarily an interest linked product
which has been very well received in the market place and
is our largest selling product right now.
How much has bancassurance contributed to your
premium income?
Fifty percent of our business comes from bancassurance.
What is your target for this fiscal?
We are targeting at Rs. 121 crore in new business during
this fiscal.
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