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What is your Wish List from Budget 2005-06 for the insurance sector?

The key area here is on FDI. The finance minister announced in his previous budget in 2004 his intention to increase FDI from 26 to 49 %. As everyone knows, this requires legislation to be passed so that the act can be amended to reflect this. We are certainly looking forward to that move so that MetLife in particular will be in a position to come in and invest more and increase its stake in the Indian venture as well .The second issue would be related to taxation.

Some of the key recommendations that the industry has made 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 to provide 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 would be very important to manage and 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 insure that there are sufficient investments take place particularly within the infrastructure area for the growth and development of the economy and 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? Is there an inherent danger in unit linked products in the long run that MetLife sees and other insurers do not see?

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.

courtesy: www.Insuremagic.com