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Growth across all channels is healthy
HDFC Life, Vibha Padalkar, MD & CEO
Jun 28, 2019 | Source: Livemint
On healthy growth in premiums: HDFC Life reported a 52% growth in premiums in May and almost 70% growth in individual single premiums as well. Ms. Vibha Padalkar the MD & CEO of HDFC Life says there is no reason to believe that HDFC Life should not be trending at a healthy growth rate and what is important is that the company grew well in the first two months of the last year as well and so there is really a very high growth rate base of ~31%. Ms. Padalkar mentioned that this kind of high growth should continue and is tracking as per company’s growth expectations. According to Ms. Padalkar, the company did see a lot of uptick in the two months of FY20 owing to focus on retirement solutions and on protection while unit linked products were never a focus area at HDFC Life thus being able to deliver on all round growth.
On mix between pure protection and unit-linked insurance plans: HDFC Life has been trending very steadily on both pure protections as well as unit linked insurance plans. On protection the MD & CEO mentioned that HDFC Life has been the market leaders in terms of both the products and on the way the company sells which is through online digital mode as well as through credit protection of rapping around loans on the back of growth of NBFCs. So, it has been a combination of that and also what we have done on the entire aspect of balanced product mix. So unit linked insurance plans have been an important part of the portfolio but not all bets are in that basket. That has all helped HDFC Life innovate on a whole host of new products in the realm of protection. This is mortality, mobility as well as longevity and that is really paying off. FY19 the company ended overall on a receipt premium basis 28% of protection premium and that is higher than any other company in the industry did. Yet, it is much smaller than where HDFC Life can get to. So that trend and focus will continue.
On profitability and margins: HDFC Life’s margins grew by 200 bps in FY19 over FY18 and so can expect to see this kind of trajectory. We were just shy of 25% in FY19 and we would expect to see as protection increases as a percentage of our book that we continue to trend upwards said Ms. Vibha Padalkar the CEO & MD of HDFC Life. Having said that, there are always pushes and pulls as far as protection is concerned and one needs to be cognizant of the fact that beyond a point if it starts becoming a push product like it is happening because it is suddenly the flavour of the season in the industry, it can be that the sale is not the right fit with the individual and so one needs an assessment of the customer before one sells a protection product like any other insurance product. However, the opportunity is still very large.
On market opportunity in pure protection plans: The CEO & MD said a lot of the marque Chinese Insurance companies sell 40-50% protection on an unweighted basis and that inflection point is bound to happen in India. India’s per capita GDP is about 1/4th of where China is and when an average Indian is worried about saving something and then losing that, that is when he will start looking for protection products she said.
Thoughts on bank assurance business: Ms. Padalkar, said this year the bank assurance business has continued to trend upwards once more. Besides bank assurance, the CEO mentioned that all channels are growing well and the company’s bank assurance channel has grown upwards of 40%. In the current year, the company seeing a growth in each of its channels like agency channel, broca channel, online channel, direct channel and so, all that is trending well and so is bank assurance. HDFC Life continues to make meaningful sense to all its partners, add value, innovate on products and hence it is easier to go back to the customer with a value proposition. So the company is continuing to focus on de-risking dependence on any one channel but at the same time growing all the channels.
On reasons the bank assurance channel outpaced: The reason for the sharp jump in the bank assurance channel is that HDFC Life sold a lot of single premium products and that is largely to do with annuity products in the retail space and in the credit protect space where also there are single premium products. In the retail space, the commissions are capped at 2%, so while the volumes will certainly go up, which is what one is witnessing, the percentage remains at 2% or less, so the upper cap is 2% on single premium. So in a way it is a good problem to have because the more commission the company pays out, it would mean that HDFC Life is trending well in the annuity businessh.
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