HDFC Life will focus on a balanced product mix: Vibha Padalkar, MD & CEO

Vibha Padalkar, MD & CEO, HDFC Life, talks about the first-quarter results, impact of the second wave of COVID, claims and settlement ratio, product mix, pricing of products and market share among others during a candid chat with Swati Khandelwal, Zee Business. Edited Excerpts:

Q: This quarter we have seen pressure in profit due to an increase in provisioning. What are the levels at which you expecting the provisioning from here? What was the reason behind the creation of Rs 700 crore of extra mortality reserve?

A: What we saw in India in the months of April and May, wherein there was a devastating impact of COVID, and deaths were also at elevated levels and we are seeing the same in the insurance companies. Therefore, the claims have been much higher, and we are seeing 3x to 4 times more claims even than the pick of wave I. So, we thought, it would be prudent that we should have an additional reserve, and therefore if you see going back in time – two years ago when the pandemic started, we had an additional reserve of Rs 41 crore over and above other death claim reserves and that we have increased to 4x and we set up a Rs 165 crore as on March 31, 2021.

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At the end of quarter 1, the Rs 165 crore which was set up was enough for the death claims that we saw in quarter 1. In fact, Rs 69 crore of that Rs 165 crore were left over. But as I mentioned earlier that the claim remains elevated due to which we thought Rs 700 crore will be good, and we even performed an underline statistical modelling in terms of how the claims are likely to come up based on the deaths that have occurred in the months of April, May and June and some more in the pipeline. We believe that there is some conservatism is there in it and this should be adequate for wave-II. 

Q: The second wave of COVID has had an impact on the business. Tell us about the kind of claims that you received and what was the settlement ratio?

A: We paid over 70,000 claims in quarter 1 and as I mentioned this is almost 3x to 4x of the highest claim levels of wave-I. If you have a look at the numbers, then it was just short of about Rs 1,600 crore on the gross basis and post-reinsurance about Rs 950 crore has been paid in the standalone quarter. 

Q: What is the outlook on your overall product mix going forward? How do you see protection ULIPs shaping up? During the last interview, you said that digital is a big focus area for you. So, how much has it helped you in new business premium growth and APE Growth?

A: As far as product mix is concerned, we continued with our strategy of having a product balanced mix. If you have a look at it then it was almost an ideal product mix, where non-par policies are about less than a third of our business, participating products were about 30% of our business, united linked was less than 30% and the balance in the protection was at about 8% of individual APE and annuity of about 5%, and it is slowly trending upwards. So, this was ideal. If you have a look at the annuity growth for the standalone quarter one, then it was about over 60% of growth.

Credit Protect grew extremely well at about 204% growth, of course, base-effect was there because if you remember about the first quarter of the last year then there was a lot of impact of COVID wave-I and a lot of banks and NBFCs were not lending due to which credit-protect was also impacted. But nevertheless, if you will look at the credit protect growth in this quarter then it grew by 204%, which is fairly a holistic growth and we are very optimistic in terms of, if wave-III is very limited and didn’t have an impact on mortality claims then we will be back on track to normal. 

Q: Recently, IRDAI gave it nod for general insurance companies to raise the premium for CORONA Kavach products. Are life insurance companies are working on pricing?

A: Pricing will be dynamic and IRDAI will also, I am sure, allow us to do similar sorts of things. We do have our flexibility, which is a good thing. While there is a standardization of features on standardized term product, the Saral Jeevan Bima but at the same time, the regulator has given flexibility in pricing, which we really appreciate because pricing is a function of market economics also what are the death claims that we are seeing and so on. So, we already gave that in the life insurance sector as far as some of the products like Saral Jeevan Bima is concerned.

Q: What is your outlook on the market share and are you happy with where you are and what kind of steps will be taken to increase your market share? 

A: If you will look at our overall market share that has gone up from last year 20.3% to 22.3%. If you have a look in terms of individual market share that is hovering just shy of 18% at about 17.8%, this is what I am looking for for the quarter. We do not say that the market share is the endgame, everything must come in where there is new business growth in terms of both quality of business, persistency, expense ratio and so on and all of those must come through. And a resultant effect, the market share will also go up. It so happened that we have been consistently among the top three in the private sector. Of late, we have been among the top two in the private sector and sometimes at number 1. And I am reasonably happy with the performance.