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Instant insurance cover for loans

Kotak Mahindra Life provides instant insurance coverage along with loans. It has served 85 million customers through 300 partners:

Subhasis Ghosh highlights the efforts at making the process completely seamless for both the lending institution and the customer

Kotak Mahindra Life Insurance Company is providing bundled insurance cover to loan customers under group credit life insurance. The financial institution in this case becomes the policy holder/group organizer and the borrower opting for insurance insured beneficiaries. The company is a leading player in this space and among the first to start this business. With learnings of close to 2 decades, it not only continuously refined its products and processes, but added a great deal of flexibility in structuring the cover to customize it as per the products and processes of the lending institutions.

Subhasis Ghosh, Head of Institutional Business, Marketing and Alliances of the company, says the company ties up with banks, housing finance companies and other financial institution that provide any type of loans, including housing loans. It has over 300 such relationships and covered over 85 million gross lives till 31 October 2020, he adds.


Financial institutions can customize coverage as per the loan structure. The objective is to tailor-make the cover to mirror the loan structure as closely as possible. Subhasis Ghosh describes the commonly used types of coverage: “The reducing cover reduces at a pre-defined rate. This rate is usually higher than the rate of interest at which the financial institution lends. The tenure is same as the tenure of the loan. We recommend the cover to be kept slightly more than the loan to ensure adequate coverage at all stages.”

Flat + reducing cover remains flat for a defined period at the start (pre-EMI period) and then reduces for the balance tenure. “This option is chosen for the under-construction properties where the loan disbursement happens in tranches and the EMI starts after final tranche of the loan is disbursed. This is a must-have cover for the customer in order to protect the family and the house in case of any untoward eventuality. In case of death of the borrower, the outstanding loan is paid by us to the lending institution; this ensures that the family/dependents are not burdened with the future EMIs/liability,” says Subhasis.


Kotak Mahindra Life Insurance has simplified processes with a view to ensuring superior experience for the customer and lending institution. Subhasis explains: “With IT integration, coverage is instant as more than 90% of the cases are non-medical. Only a health declaration is to be signed by the borrower. This is done along with other loan documents that the borrower signs for his home loan. Upon conversion, policy certificate is instantly emailed and also sent on the registered mobile number of the customer. For medical cases, the customer has to complete the medical requirements for the cover to commence. The cover commences from the date of 1st disbursement of the loan.”


The rates of premium depend on several factors. “Premium rates depend on the type of borrowers, their age distribution, gender ratio, ticket size and credit appraisal process of the financial institution concerned,” says Subhasis, adding: “Accordingly, there is corresponding increase in the EMI.”


What happens when a lender sells the loan to another lender? Subhasis clarifies: “The insurance cover for the already insured customers will continue. The Master Policy Contract is non- transferrable. Depending on the contract between the existing lender and the new lender, the other details can be worked out.”


The company has seen a decline in this business in the current financial year due to the slowdown in housing loan disbursements at the industry level. Subhasis hopes that the situation will surely return to normalcy very soon.

The company has systems and processes to ensure end to end digital journey right from onboarding of the customer to registration of the claim for the financial institution as well as the end customer. Says Subhasis: “We aim at making the process completely seamless for both the lending institution and the customer, with system integration, self-service portals, and instant digital issuance. We also have API integration with several clients, which gives complete online journey, both for the financial institution as well as the borrower.”

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