ICICI Prudential Life Insurance Company (IPru Life), a private life insurer, sees its annuity business growing ahead of its savings insurance plans growth this fiscal on the back of improved awareness and sentiments towards annuity range of products among customers who want to secure their incomes in their golden years, Amit Palta, Chief Distribution Officer, has said.
“If overall insurance on the saving side grows by 17 per cent or 18 per cent, then annuity can grow ahead of it at around 25 to 30 per cent”, Palta told BusinessLine when asked about IPru Life’s growth expectations for annuities this fiscal.
The private life insurer had clocked 31 per cent growth in annuity business last fiscal at ₹300 crore in Annualised Premium Equivalent (APE)..
“ We want to play a very active role in accumulation and not restrict ourselves only to products which are categorized as pension products. We want to get customers to start purchasing our entire gamut of savings products with accumulation for annuity as a purpose”, he said.
“if you were to look at overall retirement space, it is broken into two elements, one is when you accumulate money, and second, when you de-accumulate money…de-accumulation is called as annuity. So, I don’t want to restrict myself only to de-accumulation stage”.
Synergy with subsidiary
Palta also said that IPru Life wants its synergy with its wholly-owned subsidiary ICICI Prudential Pensions Fund Management Company — which is still at its early stage—to play out in the coming days.
He sees strong synergistic opportunities in selling IPru Life’s annuity products to every NPS subscriber of the pension funds company at the time of retirement or even during the pre-retirement exit. ICICI Prudential Pension Fund Management is a pension fund manager that manages NPS monies of subscribers. It is also registered as an annuity service provider with the pension regulator PFRDA.
“So every maturing NPS subscriber of our pension fund company, is an opportunity for us to sell an annuity. So I’m sure you know, every NPS subscriber today eventually will convert into an annuity customer and will want to invest in that company where he has been doing his accumulation”, he said.
Palta highlighted that a low awareness and a high sensitization on protecting income, not just for current times, but also for future and also for retired times has led to a natural and a positive outcome for Annuity as a product range.
Annuity penetration ‘low’ in India
Life insurance companies have been ramping up their focus on annuity business given the low penetration in India for such products. In India, penetration of both protection as well as annuity, is “very, very low” and overall pension AUM is only 14 per cent of Gross Domestic Product (GDP), Palta highlighted. This is at a time when pension AUM is in excess of 100 per cent of Gross Domestic Product (GDP) in most of the developed countries.
IPru Life currently has full suite of annuity products including deferred annuities as well as immediate annuities.
Asked as to what explained the robust growth of annuity business for IPru Life last fiscal, Palta said that the life insurer’s annuity business grew as an outcome of its decision to fill up all the product spaces.
“And this was supported with the sentiment which was about protecting income for a long period of time and people are far more conservative about planning for their income, not just during their working years, but also for the income after they retire. So, there is that kind of a softer acceptance to the fact that protecting income after retirement is also taking a priority in consumers mind”, he added.
Earlier, Annuity was only seen as a product which was bought over by people who are retired; Now, there are options being created where people can plan for their golden years much ahead of their retirement.
For a customer who may not have a lump sum to invest for his retirement income, IPru Life has now introduced a product which is a regular premium Flexi plan, where customers every year can keep aside some money in the phase of a life stage, which is nearing retirement.
June 18, 2022