HDFC Life Outpaces Peers As Life Insurers Return To Growth After Six Months

HDFC Life Insurance Co. Ltd.’s individual annualised premium equivalent rose 43% in September, tenfold faster than the industry average, according to its disclosures to the insurance regulator. The growth was aided by better digital expansion and a balanced portfolio with higher protection and a lower share of unit-linked plans.

The life insurance industry, including Life Insurance Corporation of India, saw its annualised premium equivalent grow 4.1% in September. That’s the first expansion since January. Private players grew for the first time since February.

While SBI Life Insurance Co. Ltd. continues to command the highest share among private players, HDFC Life held its second position.

Here's why HDFC Life fared better than others:

Product Mix

Compared to its peers, HDFC Life has the lowest share in the unit-linked business, helping it counter the impact of volatility in equity markets during the pandemic. What also aided its growth is increasing demand for guaranteed or assured returns during volatility in equity markets and surge in protection or term plans on the back of increasing health awareness.

An increase in pricing of protection plans due to higher reinsurance rates aided margins. According to a September note of ICICI Securities, HDFC Life and ICICI Prudential Life Co. Ltd. hiked prices by 6%-39% and 10-41%, respectively.

“What has worked for us is the focus on protection with its share in individual APE growing by 50%,” Vibha Padalkar, managing director and chief executive at HDFC Life, told BloombergQuint after announcing the insurer’s first-quarter earnings. “We are ramping up the focus on protection.”

She said the company would gain from the flight of customers toward bigger and trusted brands.

Digital Expansion

HDFC Bank has better digital capabilities than peers, according to Nirmal Bang. That aided its growth during the pandemic when people couldn’t venture out of homes because of one of the world’s harshest coronavirus lockdowns.

Almost 50% of the medicals are done online. Query resolution through bots across WhatsApp, webchat and email saw an increase of 90%, 36% and 110%, respectively, the company had said in the first-quarter earnings statement. Almost 89% of renewal collections are done online.

That compares with around 70% renewal premium collections by SBI Life in the first quarter. ICICI Prudential Life didn’t disclose this percentage.

Analysts’ View

Nirmal Bang

• HDFC Life outperformed due to a more balanced product mix and a higher share of pure protection and annuity products.
• Current health crisis would result in higher conversion rates for protection products, which should be beneficial for HDFC Life.
• The higher share of tele-medicals should be supportive of growth going ahead.

Spark Capital

• HDFC Life has also shown improvement in the ticket size during the quarter.
• That is driven by higher ticket size non-participating guarantee business, contributing to growth.

Investec

• HDFC Bank as a distribution channel is aiding HDFC Life’s growth.