HDFC Life Says Cautious On Term Insurance Over Evolving Risks

HDFC Life Insurance Co. has taken a cautious approach in selling term plans during the pandemic as death claims spiked during the second wave and the insurer set aside more provisions for Covid-19-related payouts in the first quarter.

“We are able to convert only 60-62% of the people willing to buy term insurance due to supply-side constraints (in the quarter ended June),” said Vibha Padalkar, managing director and chief executive officer at HDFC Life, citing reinsurers' concerns and evolving risks during the pandemic.

“The business refused due to supply-side constraints of not being able to assess risks is not business lost but mostly business deferred,” she said. Customers are prepared to wait or settle for a lesser amount of cover, she said in an interview with BloombergQuint’s Niraj Shah. This, according to her, will continue for some time.

Death claims have spiked three to fourfold over the peak of the first wave, Padalkar said.

India’s Covid-related toll spiked in April and May as the nation faced a deadly second wave, overwhelming hospitals. The official toll is more than 4.18 lakh, the third highest in the world behind the U.S. and Brazil. Experts, however, suggest large-scale underreporting. Latest research models estimate India’s Covid-19 casualties to be at least threefold higher.

HDFC Life set aside an additional Covid reserve of Rs 700 crore, impacting its Indian GAAP profit for the three months ended June.

Most of this amount will be used towards deaths that have already taken place but not intimated yet and other unknown claims, Padalkar said. The insurer expects to start receiving claim intimations over the coming three to four weeks.

“We are reasonably confident that the provision is not lower than required based on existing visibility-vaccination drive, fall in death rates and statistical modelling,” she said. But HDFC Life, she said, has not yet factored in a virulent third wave where vaccination may prove ineffective against a new mutation of the virus.

Padalkar said Rs 69 crore also remains unused from the Rs 165 crore provided for Covid-19 claims at the beginning of the year.

Business And Outlook

New business premium was aided by product-mix and a base effect. Profit, however, fell sequentially and over a year earlier in the first quarter. Padalkar said the company expects to maintain a 17-20% growth in business, in line with market expectations, in spite of the “unknowns”. The 30% growth in annual premium equivalent has boosted growth targets for the year, she said.

HDFC Life is confident of maintaining a top-line growth and gain market share, as witnessed in the quarter, according to Padalkar. “If I were to look at on a three-year basis, we grew at 17% versus the industry growth of 3%.”

The insurer will focus on profitability pools, a balanced product mix, cost cuts and selling more long-term products. That would help improve new business margins, she said.

“We would be more comfortable growing at a 15-20% in the protection business while looking at all aspects: top line, risk management and profitability,” she said.

HDFC Life intends to keep unit-linked policies at a certain level.