Don't expect material change in bancassurance regulations: Vibha Padalkar

Vibha Padalkar discusses Q1 margins, policy trends, product mix and regulations

With HDFC Life Insurance’s number of policies going down in the first quarter of the financial year 2025-26 (Q1FY26), Vibha Padalkar, the company’s managing director and chief executive officer, expressed hope of things picking up in the next 2-3 quarters. In an interview with Aathira Varier and Subrata Panda, Padalkar talks about clarity on bancassurance, the company’s performance and the road ahead, amid a challenging environment marked by choppy equity markets and a monetary easing cycle. Edited excerpts:

 

Bancassurance has been a major discussion point over the last few months. Is there any clarity from the regulator’s side or from the government on how they want to go about it?

 

There is a lot of clarity now. Clearly, the government's views are that it is important to have distribution touchpoints to get to the last mile. Banks have six times the number of touchpoints than insurance companies, including Life Insurance Corporation of India (LIC). So, they have no intentions to meddle in the construct of the way bancassurance works today. At the same time, they are saying that on credit life, for example, people should be able to borrow without necessarily or mandatorily having to buy insurance, which we have no disconnect with. Also, the general guidance has been to look at mis-selling complaints wherever there are senior citizens, poorer sections involved, and so on, which we have rolled out. Those are all good things to have, but we do not expect anything that is a material change in bancassurance regulations or it happening at a very sudden pace without engagement with the sector.

 

Value of New Business margin (VNB) in Q1FY26 was fairly stable on a year-on-year basis, but sequentially we have seen a dip...

 

Q1 always has the lowest revenue, because there is a seasonality. So as revenue continues to move up, that is when the margins also move up, so you will find that Q1 will always be lower than Q4 standalone or even full year and then the build-up will happen over the period. So, despite the impact of margins of 0.3 per cent due to the impact (of surrender value), which is almost like an opening handicap that we have versus last year, we will try and hold on to our margins. Any upside on margins we will continue to invest in business and like we have articulated, we will invest in our proprietary channel as well as in our technological capabilities. We will hold on to the 25 per cent range.

 

There has been a drop in the number of policies sold in Q1. Is this a concern or will it correct itself going forward?

 

In most of the cohorts, our number of policies grew very well.  However, in certain cohorts, especially lower ticket cohorts, we had to do some recalibration and that was the reason why the number of policies have gone down. But we are reasonably confident that it is going to pick up over the next 2-3 quarters. Also, on a two-year compounded annual growth rate (CAGR) basis, it is fairly healthy at a 10 per cent growth. I see this (drop in number of policies sold) as somewhat seasonal. The share of our credit line for the quarter has grown by 6 per cent and microfinance (MFI) is yet to pick up. Non-MFI business, which is about 85 per cent of our credit line business, is growing fairly well.

 

The equity markets are choppy and interest rates are falling.  How do you position your product mix given this environment?

 

Unit Linked Insurance Plans (ULIPs) continue to be very buoyant in Q1. There is still a pull for ULIPs, as a result of which, we did see both for us and as a sector, a fair bit of money flow coming into ULIPs. In Q1, we saw about 15 per cent growth in ULIPs. Also on the back of some new product launches as well as re-launches, we saw participating products more than doubling. Our protection also grew by 19 per cent and annuity business grew by 25 per cent. Going forward, the growth in participating products will even out to some extent. HDFC Life stays away from aggressive pricing and we ensure that business we do is at the right and supportable price. Now some of the aggression has shifted to non-par pricing. So, in Q1, we chose to stay away from some of the aggression. But it's beginning to taper and we will come back with a bang over the next 2-3 quarters.  So, I do, see going back to a fair bit of balanced product mix, which will be around 30 per cent non-par, par would be one-third of the business, ULIPs will be around 40-45 per cent of the business, and term will be around 6 per cent, with annuity being around 5 per cent of the business.

 

Amid the changing interest rate environment, have you made any changes in your product pricing?

 

The pricing in non-par continues to remain dynamic and it is very much in line with the yield curve. We do not really take any undue risks and we do repricing many times just in line with the interest rate movement.