The life insurance sector is a key economic growth driver aiding in the development of the nation and bringing financial stability to the country, shares Mahesh Balasubramanian, Managing Director, Kotak Mahindra Life Insurance Company Limited, in an exclusive interaction with Srajan Agarwal of Elets News Network (ENN)
With the Indian insurance industry growing steadily and the IRDAI’s goal of achieving “insurance for all” by 2047, could you elaborate on the specific initiatives and strategies Kotak Mahindra Life Insurance Company Ltd is implementing to promote financial literacy among the Indian population?
Insurance Regulatory and Development Authority of India (IRDAI) has committed to enable ‘Insurance for All’ by 2047, where every citizen has an appropriate life, health and property insurance cover. This reform agenda derives inspiration from the Government of India’s vision of financial inclusion and strong emphasis on accelerating reforms. To attain this objective, efforts are being made towards creating a progressive, supportive, facilitative and a forward looking regulatory architecture to foster a conducive environment leading to wider choice, accessibility and affordability to policyholders. A series of Regulatory reforms have already been done to strengthen the three pillars of the insurance viz ecosystem a) Customers , b) Intermediaries and c) Insurers and additionally, every insurer has been assigned a State to further these initiatives.
Kotak Life Insurance (KLI) is the lead insurer for the state of Tamil Nadu and the Union Territory, Puducherry. While insurance penetration in these geographies are better than India, there is still a lot of ground to be covered to propagate insurance awareness to the last mile.
As a very first step, Kotak Life ably supported by the IRDAI had discussions with the State and District administrative offices of Tamil Nadu & Puducherry appraising them of our plans and taking their views on-board as well. Our state insurance plan initiatives branded ‘SURAKSHAM’ are now broadly slotted into 3 stages: 1) increase awareness, 2) increase accessibility and 3) increase affordability.
To put wheels to the plan, we have formed the State Level & District level insurance committees which closely work with the respective administrative offices for on-ground execution. The Health camp initiative we run across the state was taken interior into the districts of Virudhunagar, Thoothukudi, Kallakurichi & Thirukkanur village (Puducherry) which saw 4,000+ people benefitting from this service. The Virudhunagar and Puducherry campaigns were also flagged off by the respective District Collectors to support this initiative in their areas.
Further, we are leveraging our on-field distribution strength by empowering them with a ready-to-use inventory of exciting collaterals to promote insurance awareness in their local areas. We are also liaising with NGOs, SHGs etc to spread financial awareness in district panchayats and in schools.
All in all, I can say that Kotak life is fully committed to vision 2047 and the Josh is high in the field.
Achieving “insurance for all” is a noble objective, but how is Kotak Mahindra Life Insurance Company Ltd making it easier for people, particularly those in underserved segments, to access and purchase life insurance policies, ensuring that this goal is realised by 2047?
Making insurance purchases easier for people are covered through our initiatives aiming to improve accessibility and providing affordable life insurance solutions to customers.
From an accessibility point of view, Kotak life has a strong presence of 36 branches across Tamil Nadu & Puducherry with more than 16,000 licensed distributors. All our branches regularly conduct financial planning/awareness sessions. New customers can visit any of our branches or talk to any of our trained Agents to make an informed decision on the best-fit solution for their needs. In addition, we are also building additional capacity in Tamil Nadu, by setting up new branches in:
- Virudhunagar
- Vellore
- Coimbatore
- Cuddalore and
- Kumbakonam.
Further, we are liaising with our bank partners to offer PMJJBY, a Govt backed Life Insurance scheme which offers a cover of Rs 2 lakh for a premium of just Rs 436. Over and above this, we have enabled easy-to-purchase few click affordable insurance products for select bank partner customers. We are also in talks with the Puducherry administrative office to co-create products in line with the girl child Government scheme.
We are continuously exploring initiatives to reach closer to the customer and offer very relevant and yet very affordable solutions across customer segments.
In the context of the company’s strategy, could you explain the significance of focusing on protection and long-term savings protection? How does this align with the changing demands of the Indian insurance market?
Kotak Life has always believed in and pursued PALTS (Protection and Long-Term Savings) as the core offering that offers unique solutions irreplaceable by any other financial instrument. More than 38 per cent of KLI’s New business premium was from Protection products hinting at customer’s growing awareness of life insurance protection.
Increasing digital adoption for financial transactions is also witnessing younger customers purchasing insurance – be it protection or long-term savings. While demand for Protection & Long term savings continue, there is also a shift towards providing personalised and flexible solutions that meet customer needs.
Kotak Life’s product & distribution strategy is fully aligned to this evolving need of customers through:
- Innovative byte-sized Term plans in line with the demands of Millennials and first-time insurance buyers that come packed with a host of wellness benefits.
- Combi products offer benefits of both Health and Term products.
- Pension products with choice of premium payment term and deferment period eased the buying processes by enabling simple, few-click purchase journey’s on mobile apps, offering Pre-approved Sum Assured (PASA) and relaxed documentation process
- In the long-term savings space, KLI offers a wide range of guaranteed plans including pension plans with flexible payment terms as well as flexible payout terms.
We continue to keep our ears close to the customer to be in sync with the demand dynamics and be relevant to the customer offering the best personalised solutions for all life needs.
Could you elaborate on the key risk management strategies that your organisation has implemented to maintain financial stability and protect the interests of policyholders, especially in an ever-evolving and sometimes volatile insurance landscape?
Kotak Life has a robust Enterprise Risk Management (ERM) framework focused on managing its entire risk universe. The Company has always maintained a healthy solvency ratio ensuring capital adequacy for meeting policyholder’s liabilities at all times. The Company’s solvency ratio as at June 2023 stood at 2.68 well above the regulatory requirement of 1.50.
To manage financial risk, investment strategies are drawn considering the nature and term of liabilities. The duration of assets and liabilities are closely monitored to manage interest rate risk. Further, for guaranteed non-participating products, the Company hedges future expected income cash flows with Forward rate agreements (FRAs) and other available instruments to ensure that the returns guaranteed to the policyholders are met. The Company also closely monitors expected cash flows to ensure that the liquidity risks are adequately managed.
For management of demographic risks, such as mortality, morbidity, persistency, etc. The company ensures by way of underwriting that risks accepted are commensurate to the premiums charged. Also, financial underwriting helps in analysing the likelihood of policyholders continuing with the policy thereby helping in managing persistency risk. For Fraud Risks, we use machine language (ML) predictive models which classify a policy into High to Low-risk categories. To top all this, we also have a reinsurance cover which helps in protecting from adverse mortality experience.
To manage cyber risk, KLI has implemented a robust information and cyber security program to protect critical business information, systems and assets.
As the Indian insurance industry continues to grow, how is Kotak Mahindra Life Insurance Company Ltd contributing to the broader economic landscape, including job creation, investment opportunities, and overall financial stability, while pursuing its business objectives?
The life insurance sector is a key economic growth driver aiding in the development of the nation and bringing financial stability to the country. The sector mobilises public money to fund government-sponsored infrastructure projects thereby directly contributing to the nations development. As of March 2022, the industry had contributed about Rs 4.8 trillion toward Infrastructure investment and provided over 3.18 lakh direct employment and 24.5 lakh indirect employment in the form of individual life advisors during FY22. In FY23 the Life insurance industry’s new business grew strongly by 18 per cent YoY, the highest growth since FY20.
Kotak Life too has been playing its modest role in nation-building by mobilising public money in long-term savings & protection products.
- In FY23 the company mobilised a total premium of over Rs 15,000 crore where the new business premium grew faster than the industry at 25 per cent YoY and renewal business by 11 per cent YoY
- As of March 2023, the Company’s AUM stood at Rs 64,285 crore. The majority of funds are invested in safe and long-term government bonds (both State and central) thereby contributing in nation development projects and also providing safety to policyholders money.
- In FY23 provided direct employment to about ~5,600 people and ~55,000 indirect employment in the form of life advisors
- Kotak Life is a CRISIL AAA / Stable rating from CRISIL Rating which is considered to be the highest degree of safety regarding timely servicing of debt obligations. We have consistently maintained strong financials across years be it solvency ratio, net worth, or shareholder profitability, which enables the financial stability of the company
- Furthermore, at the moment of truth, Kotak Life has paid over 1.5 lakh death claims worth Rs 1,523 crore with an overall claim settlement ratio of 99.56 per cent (Individual ratio 98.25 per cent). As on March 2023, Kotak life covers 4.6 crore active lives.
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