'Combined Life, Health Plans Won't Increase Complexity'

The life insurance market in India has recorded a consistent premium growth over the years, but insurance penetration is yet to reach the desired level. Quite in line, HDFC Life Insurance has shown a growth of 5 per cent year-on-year in its total annual premium equivalent in the nine months until December 2023 and has grown on other parameters as well. Its assets under management (AUM) went up 20 per cent, while it recorded a net profit of 16 per cent y-o-y, in the period. Even in terms of penetration, the company’s growth in Tier II and Tier II cities are positive. Vibha Padalkar, managing director and chief executive officer of HDFC Life Insurance shared the secret sauce for the growth in a conversation with Nidhi Sinha, editor, Outlook Money, talked about the challenges the insurance industry faces, and the road ahead in view of recent regulatory proposals. Edited excerpts:

- Vibha Padalkar

While on one hand the insurance market is expanding in India, penetration is reducing. How do you explain this?

Penetration is usually expressed as a percentage of the gross domestic product (GDP), and so it depends on the GDP growth as well. If I were to look at it from a standalone basis, there is a large opportunity for life and health insurance penetration in India. The reasons are many: a larger population is coming into the lower middle class and middle class segments, people are living longer, aspirations are rising, and people are beginning to understand the value of life insurance. Also, India is among the top countries in terms of overall GDP, so there is percolation of the overall GDP at an individual level, which will also continue to rise.

I think that with the right regulation, the right level of product innovation, and rising affordability and awareness, India can reach an inflexion point in 5-10 years and move towards a point where by 2047 every Indian will have insurance.

Penetration went up during Covid, but now those memories seem to be fading. Along with that, will last year’s new tax norms for high-ticket policies and the new tax regime making the Section 80C benefit irrelevant, pose a challenge?

We saw an uptick in term insurance after the onset of Covid. But the need for term plans has not been lost, in terms of messaging, even now.

For most insurance companies, the term insurance portfolio is growing at a faster rate compared to the company’s overall growth. Term insurance is unlikely to grow more meteorically, but it can in some quarters, over the next 2-5 years. Also, as GDP per capita rises, we will see the need for term insurance rising. We are already seeing healthy rates—in terms of sum assured, HDFC Life grew upwards of 38 per cent in the first nine months of the current financial year.