Money won’t move from insurers due to tax rules: ICICI Prudential MD

financialexpress.com:

ICICI Prudential Life Insurance’s MD and CEO Anup Bagchi believes that despite the new tax rule, where proceeds from non-Ulip products exceeding Rs 5 lakh annual premium have become taxable, will impact the industry too much. The money, he said, would “largely” remain in the insurance industry as long as there aren’t substitute products in the financial sector that can replace the long-term nature of insurance products.

“Yes, the number of customers (with greater than Rs5 lakh annual premium policies) has certainly decreased. And I am sure that it is for everybody. But, it is not disappearing due to taxation. So, we are seeing that this money is now shifting towards Ulips and more participating balanced kinds of products. So, this money is staying by and large in the system. I don’t think that there has been too much leakage happened because of this,” said Bagchi.

At a time when private sector insurers’ value of new business (VNB) is on the decline, the private sector insurer has also been emphasising on a “diversified” product mix and “right” set of customers (VNB) margin rather than being fixated on it.

“The VNB margin should be led by the product mix and the customer mix and the channel mix. And it should not be an end-all in itself…I feel there should be healthy margins. Healthy margins create healthy companies. So, it is not that the margins should not be focussed on, but margins should not be fixated on,” added Bagchi.

According to him, margins should be an outcome of the right set of customers who have demands for the right kind of products. “If we don’t have the right set of customers, we would have to create the demands for the right set of customers for the right kind of products, and margin will be an outcome