Expect life insurance industry to grow 10-15% this fiscal: Amitabh Chaudhry

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Mumbai | July 17, 2015 12:16 AM

The life insurance industry, which has seen some tough times during the last few years, is expected to grow 10-15% in the current fiscal...

The life insurance industry, which has seen some tough times during the last few years, is expected to grow 10-15% in the current fiscal, says Amitabh Chaudhry, MD & CEO, HDFC Standard Life Insurance Company, in an interview with Chirag Madia. Excerpts:

How would you rate HDFC Life’s performance in the previous fiscal?

Our overall premium rose to R14,830 crore in FY15, a growth of 23% over the previous year. Of this, renewals contributed R9,340 crore, growing 16%. Effectively, we were able to grow the new business portfolio at a much faster pace last year than before and our market share among private players increased from 13.8% to 14.8% in the individual segment and from 14.4% to 17.8% in the group segment.

Our AUM increased 33% from R50,600 crore to R67,000 crore during this period. .

So, if we look at all the metrics, our performance stands out in the industry. We are market leaders in online term space and our volumes are four times bigger than the next player. The reason we are leading is because we have innovated and continue to do so. For example, we have launched Ulips where the charges are lower than what the regulator has allowed. Thus, from a customer’s perspective, it’s a great product.

What targets have you set for FY16?

We aim to grow our new business faster than the industry, improve our persistency and continue to increase new business margins. It is a tough balancing act, but this ensures our performance is sustainable. From what I am hearing from other players and we are experiencing ourselves, I expect the industry to grow 10-15% in the current financial year.

We will grow higher than the industry pace. I am not putting forward any numbers because our industry has gone through too many changes in the last five years, so it’s not easy to predict. In addition, we have signed up for non-financial goals, which include reduced attrition levels, improved quality of sales and service standards, technology-related investments and skill building, which will help us grow beyond FY16.

What’s stopping foreign partners from hiking their stake in insurance ventures despite the opening up of FDI?

The confusion around the concept of ‘Indian-owned and managed’ under the insurance Bill has now been resolved, thus clearing a big hurdle.

Also, I believe many foreign players are holding discussions with their Indian partners on increasing their stake. This will, of course, take some time because, apart from coming to an agreement on the exact stake itself, they need to reach a conclusion on valuations as well. I do believe, in the next six months, we will hear of many more deals.

Has your foreign partner initiated the process of raising its stake?

I think everything is in the public domain and our shareholders have talked about this in the past as well. Shareholders are discussing among themselves the quantum of stake, valuation, timing infusion and associated terms and conditions. . There is an elaborate regulatory process to list an insurance company and we are studying it in detail.

This process will take some time as it will the first time an insurance company in India would list. Also, we are not in a hurry to list because we don’t need money to fund immediate growth.

What is your opinion on Irdai’s proposal mandating a minimum of 25% of unit-linked funds in Central government securities?

It was a big surprise for the industry. I would like to add that Ulips are market-linked products and, if these draft guidelines are accepted, it will reduce returns to policy holders.

Apart from that, such measures will lead to the product becoming non-competitive and the industry could lose its share to other investment asset classes.

Life Insurance Council and other members from the industry have met the regulator and I hope they will hear the industry’s voice. We believe if this draft becomes a reality, it will diminish the value proposition of Ulips.

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