Don't see term product prices rising: HDFC Life MD & CEO Vibha Padalkar

Vibha Padalkar talks about the adequacy of reserves the company set aside for future claims and the impact of higher claims on term prices, among others

The life insurance industry was gradually recovering from the first wave of Covid when the second wave struck. While the insurers were prepared, the ramifications were much more than what they had anticipated.
 
VIBHA PADALKAR, managing director (MD) and chief executive officer (CEO), HDFC Life, in an interview with Subrata Panda, spoke about the adequacy of reserves the company set aside for future claims and the impact of higher claims on term prices, among others. Edited excerpts:
 
Has business picked up after Q1?
 

We are seeing very robust trends. Last year, things had started picking up during Q2 and Q3. So, while Q1 had a low base, the uptick had started happening. Not only digital channels but all our distribution channels are doing well. Even face-to-face channels are growing anywhere between 40 and 50 per cent.

 
What is the trend you are seeing on the claims front?
 
Yes, on the individual front, we are seeing lower claims than the peak of the second wave. But it is still elevated when co­m­pared to the first wave. However, on group claims, there is always a bit of a lag. We are watching this closely but we expect to see a downward trend towards the end of this month.
 
Would you need more reserves, given the possibility of a third wave?
 
If infections happen but death rates are not as bad as we saw in the second wave and even milder than the first, then our reserves should be adequate. However, if death rates in the third wave are worse than what we saw in the second wave, which was 4-5x higher than the peak of the first wave, then we would require reserves.

 
HDFC Life has provided the most among its listed peers. So, are you taking a conservative approach, or will things be really bad for the industry?
 
We have always been somewhat conservative in all aspects of our business. It is not really correct to compare the rupee value because we may have written a lot more business over the years and might have grown faster in term business. So, it really depends on the sum-assured on our books versus somebody else’s sum-assured.
 
Is the company taking a conservative approach towards the individual protection business?
 
In individual business, in Q1 of FY21, we grew by 50 per cent because of the base effect. And, the 50 per cent growth was on the back of the pandemic because there was a rush to buy term products. There was also a price increase that was in the offing. The reinsurers have tightened their underwriting standards, and we are also asking people that those who are not relatively young (<40) will need to undergo medicals. But people were not comfortable going for medicals.

 
Are you staying away from group term business?
 
We do not do a lot of group-term business because in the past our experience has not been very conducive. At least till the pandemic is over, we will stay away from the group term insurance business.
 
What kind of product mix are you looking at?
 
We have an ideal product mix currently. We are looking at participating business to be 30 per cent of our overall business, our term business should be around 8-9 per cent, annuity around 5-6 per cent, and unit-linked products will continue to be one-fourth of our business. The rest will be non-par, that is, around 30-33 per cent.

 
Will term plan prices go up in the near future because of Covid impact?
 
We have not received any communication so far. Reinsurers are also waiting and watching. Once things normalise, if the extent of death rates goes back to the normal levels, then I do not see a hike in prices.
 
Will insurers ask for vaccine certificates for issuing term policies, going forward?
 
We currently do not mandate vaccine certificates but if people are willing to show it to us then it is fine. We will take it as a data point.
 
Any growth target for the company?

 
We have consistently outgrown the private sector growth by 2-3x. We want to continue doing that. We will continue to be one of the most profitable life insurers. This year is volatile and it is difficult to plan ahead. So, rather than a target, we will strive to be on a smooth upward curve.