Given India’s large aspirational population seeking financial security and well-being and their increasing longevity, more and more people are beginning to understand the value of health and life insurance, says Vibha Padalkar, managing director and chief executive officer of HDFC Life Insurance. In a conversation with Nidhi Sinha, editor of Outlook Money, Padalkar, however, emphasises that while life insurance premiums have seen consistent growth in India, much more is left to be done to deepen insurance penetration in the country to the desired level. To back her claims, Padalkar pointed to HDFC Life Insurance’s steady growth across different parameters in the market. For instance, the insurer recorded a 5 per cent year-on-year growth in its total annual premiums equivalent in the nine months until December 2023, while the assets under management (AUM) went up 20 per cent, with a net profit of 16 per cent y-o-y in the period.

Here are the edited excerpts:

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Views On Market Expansion and Penetration 

Penetration is usually expressed as a percentage of the gross domestic product (GDP), so it also depends on the GDP growth. If I 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 continue to rise.

On Covid, Taxes and Section 80C Benefits

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 faster than 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. The withdrawal of the Section 80C benefit is not that significant because Section 80C is already overcrowded for the middle class with other products. However, many research reports show that while earlier, the tax benefit was one of the top three reasons for buying insurance, now it is seventh or eighth. However, the announcement in the last Budget concerning Section 10(10D) on the taxability of withdrawal at maturity is quite significant.

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How Can The Uptake Of Term Plans Be Increased?

It has its challenges, and it will grow brick by brick. Say your employer has a group term cover (but then between jobs, you have no cover); the next step would be to extend that cover to, say, your in-laws, besides your parents. After that, you could cover credit, such as a home loan, so that if there were to be a calamity, you are not leaving liabilities as a legacy for your family. On that, Indians have started doing very well. Those who believe that ‘nothing is going to happen to me’ and the company will just make money have the option of returning the premium at the end of the policy term. Then, there are people like businessmen who have visibility on income for, say, four years. They can choose a limited premium payment plan for a longer-term cover.

Proposal To Allow Life Insurers To Sell Health Insurance

It is part of the Draft Insurance Amendment Bill and is now in the Parliamentary Standing Committee Report. We hope it will see light of the day as the new government is formed. The nuances of how it will pan out will be worked out thereafter. I feel the main reason for doing this is customer interest. So, suppose I am the customer, and I have an overseas mediclaim policy because I travel abroad, along with a standard mediclaim and life insurance from another company. In an unfortunate situation where I pass away abroad, the nominee will have to go through four or five different solutions as against one mother policy. Also, health insurance penetration is less than a percentage, while life insurance penetration is much higher. So, increasing penetration and giving customers a seamless experience make sense.

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What More Can Insurers Offer Seniors? 

Right now, we are engaging with senior citizens from the perspective of which policy they need. However, they may look for other solutions, such as medicines or equipment for the mobility impaired. They may be asking where I can get nuanced equipment, where I can borrow a specialised wheelchair for a limited period instead of spending Rs 2 lakh to buy it, and how I can find social networks in a new city so that I remain socially relevant. It’s important to develop this ecosystem, and that kernel of an idea finds a mention in the Draft Amendment Bill, which proposes that insurance companies be allowed to invest in insurtech companies doing such interesting work.

Read the full article here, published in the March edition of Outlook Money.