While life insurance had a slow start this fiscal year due to the pandemic, the demand has seen a pickup on the back of an increase in the need for life insurance among customers.
We expect the industry to be able to achieve a flat to slightly positive growth for the entire year if the current trends sustain.
The ongoing pandemic has increased the awareness about insurance coverage and the need for protection. Suresh Badami, executive director at HDFC Life, in an interview tells Chirag Madia that the company is planning to launch new product in the protection segment. Edited excerpts:
In this financial year till now, the life insurance industry has seen sharp de-growth. How long will it take for the industry to recover? What is your outlook for the life insurance industry for this financial year?
While life insurance had a slow start this fiscal year due to the pandemic, the demand has seen a pickup on the back of an increase in the need for life insurance among customers. There has been a stronger demand for protection products as well. The individual business has seen traction in the last 2-3 months on the back of this demand. There has been a 10% de-growth on a YTD basis in Individual WRP (Weighted Received Premium) and 6 % for total new business received premiums. We expect the industry to be able to achieve a flat to slightly positive growth for the entire year if the current trends sustain.
While HDFC Life has seen negative growth of 2.5% in the first-year premiums, can you throw some light on how has been the renewal premiums in this financial year for HDFC Life? As the economy is coming to terms with the effects of the pandemic, we are increasingly witnessing encouraging on-ground trends. Business has started to pick up on a month-on-month basis and we are seeing higher traction, especially in the individual protection business. As the situation begins to normalise, we expect life insurance to emerge as an important avenue for both protection as well as long-term savings, and consequently help attract a higher quantum of inflows from Indian households.
Our Individual WRP market share increased by 190 basis points from 16.1% for the period ended August 2019 to 18% during the period ended August 2020. We de-grew by 5% during this period on a high base of 55% growth in the similar period last year and delivered better than the private industry which de-grew by 15% on a base of 20% growth same quarter last year. In terms of absolute volumes (no. of policies sold), we registered positive growth of 2% for the period ended August 2020 compared to previous year.
On the renewal front, in the initial phase of the lockdown, Irdai granted an additional time or grace period (similar to moratorium) to customers (up to May’2020) for paying their renewal premiums. The above extension and the inclination of customers to conserve cash led to some impact on the renewal collections in the initial months. While we continue to see some delays in collections, we are seeing improving trends month-on-month. Our persistency ratios have been largely stable and our renewal premiums grew by 24% in Q1. We remain watchful of the collection trend over next few quarters as we see some delays in collections of some buckets of the Unit Linked segment.
Individual non-single policies are the products that stay for the longer duration, but industry as well as HDFC Life has seen negative growth in this category, when do you see it picking up? At HDFC Life, our focus is on ensuring that the relevant product is pitched to the customer – one that suits their life objectives. We focus on both single and non-single policies depending on the line of product and suitability for the client. The de-growth in non-single business for the period ended August 2020 was 6% which is in line with total Individual WRP growth rate. We should see our growth being better than industry in this financial year.
A large part of the business for the life insurance industry comes from the agents, how has the pandemic changed the channels of distribution? We have a diversified distribution mix offering our customers touch points of their choice through pan-India presence with over 400 branches, over 100,000 individual agents, over 270 partnerships with banks, NBFCs, MFIs, SFBs, brokers, new-ecosystem partners, and online access to our customers. Our bancassurance partnerships, led by HDFC Bank, focus on our proprietary channels such as agency, online and direct and new age ecosystem partners like Airtel in telecom to Paytm in e-commerce and Uber in cab aggregators have helped us garner higher market share during current financial year.
In the current pandemic, we have used the digital platforms for activities such as on-boarding, training and skill enhancement. During the lockdown we initiated VC-based skill building sessions for our employees. We have seen a higher adoption of digital assets across our channels, which makes the journey smoother for the customer as well as our distribution partners.
A lot has changed for the industry over the past few months, which are products preferred by the investors at this point of time and why? The current situation has led to higher awareness around the need for protection and the inadequacy of the current insurance coverage. This has led to an increase in demand for term insurance and we believe that the trend is likely to sustain. The pandemic could be an inflection point for protection in India, as customers feel a greater need for protection-based products to safeguard themselves and their families.
In Q1FY21, HDFC Life has seen 50% growth in the individual protection business with increase in both, number of policies as well as the average ticket size. There was a dip in the savings-oriented insurance products in the initial months due to the uncertainty of income and the customer preference to conserve cash. However, we are seeing improving MoM trends and growth picking up in savings as well. We expect a higher demand for conservative traditional products as compared to ULIPs in the short term due to market conditions. We remain optimistic about the medium- and long-term prospects of the insurance industry in India. We believe protection and retirement categories are multi decade opportunities and will grow faster than savings.
What are the products you are planning to launch in this year? We remain focused on trying to understand the customers’ needs better and offer innovative products to be able to address those needs. Some of our recent products including Sanchay Plus (non-participating guaranteed return products) and Sanchay Par (participating product) have been well received by our customers. We are expecting to launch a new product offering in the protection segment in the coming months and there are some more developments across products in the pipeline.
Irdai plans to bring standard term plans, would it impact your online term plan business as HDFC Life? While we are still to get detailed guidelines for Standard Products, it seems to be a good proposition for customers. Currently, insurance products in the industry vary with respect to benefits, terms and conditions and price. This results in customers spending time comparing benefits across each insurer. Having a standard plan will help them compare and select products based on parameters like brand; claim settlement ratio and service capabilities, among others. HDFC Life has always been at forefront in terms of customer service and technology backing the whole on-boarding, servicing and support areas.