Vibha Padalkar, Executive Director and Chief Financial Officer, HDFC Life joined the company in August 2008 after a seven year stint as Executive Vice President-Finance at WNS Global Services; a NYSE listed leading global business process outsourcing company. Vibha's key achievement during her tenure at WNS was to lead a team that successfully completed the Group's IPO on the New York Stock Exchange in a short span of six months. Prior to WNS, Vibha was with Colgate Palmolive India, including a short posting to the group's New York headquarters. Ms. Padalkar became a member of the Institute of Chartered Accountants in England and Wales in 1992, after having completed the last part of her schooling as well as college education in London. She is also a member of the Institute of Chartered Accountants in India.
HDFC Life, one of India's leading private life insurance companies, offers a range of individual and group insurance solutions. It is a joint venture between Housing Development Finance Corporation Limited (HDFC), India's leading housing finance institution and Standard Life plc, the leading provider of financial services in the United Kingdom. HDFC Ltd. holds 72.37% and Standard Life (Mauritius Holding) Ltd. holds 26.00% of equity in the joint venture, while the rest is held by individuals and ESOP trust. HDFC Life's product portfolio comprises solutions, which meet various customer needs such as Protection, Pension, Savings, Investment and Health. Customers have the added advantage of customizing the plans, by adding optional benefits called riders, at a nominal price. The company currently has 28 individual and 9 group products in its portfolio, along with 10 optional rider benefits catering to the savings, investment, protection and retirement needs of customers. HDFC Life continues to have one of the widest reaches among insurance companies with 461 branches in India touching customers in over 945 cities and towns in India. The company has established a liaison office in Dubai.
Replying to Yash Ved of IIFL, Vibha Padalkar says, “HDFCSL has done better than many other insurance companies showing the strongest growth trajectory. Our WRP (Individual business) has shown a growth of 10% for the H1FY13.”
Give us an overview of the Life Insurance Industry?
The life insurance industry has witnessed a positive 20% growth this year in WRP (Individual business) in H1 FY13. However, total WRP (Individual + Group) de-grows at 7%.
Private sector insurance companies continue to struggle in the individual business segment with de-growth of 3%. The private sector de-growth in total WRP (Individual + Group) is 0.3%.
HDFCSL has done better than many other insurance companies showing the strongest growth trajectory. Our WRP (Individual business) has shown a growth of 10% for the H1FY13. However, total WRP (Individual + Group) has shown de-growth of 2%.
Our market share has consistently increased over the past few years. Our market share in the individual space has reached 17% in the private sector in H1 FY13. We were ranked #2 in H1 FY13 amongst private insurance companies in Individual business as well as Individual + Group business.
In the two years since the changes to regulations, the industry has restructured its product portfolio (selling more traditional policies) and distribution (selling more through banks). However, performance remains lacklustre, albeit improving incrementally. There are several reasons for this, in our view:-
Weak equity markets (Sensex is down 8% since the beginning of 2008),
Competition from high interest rates on bank deposits, fixed maturity plans (FMP) products and postal savings schemes.
Lower commission rates make it an unattractive proposition for agents to sell Unit linked insurance products (ULIPs).
There is slower product clearance by the regulator (IRDA).
Publicly owned LIC has gained market share, which has increased from 49% in H1 FY11 to 68% in H1 FY13 on superior distribution, ability to market traditional products, and higher agent’s productivity. HDFC Life was an exception, as its volume growth was supported by increase in contribution from bank channels. We have seen most other private companies lose market share to LIC over the last three years in the individual space for new business premium.
The recent pick-up in equity markets, if sustained, could provide a boost to sales of ULIP products after an initial hiccup of higher surrender rates, which often happen as investors withdraw funds after an initial phase of good market performance. The companies are looking to optimise cost & improve the profitability with focus on increasing productivity and revenue, per employee and branch, as also maintaining higher level of persistency & conservation ratios.
What are your views on FDI in insurance?
It is a welcome move because the promises made in the early start of the industry will now encourage insurance companies to be able to access capital.
The penetration ratio in life insurance sector is 4.4% and 0.76% in the non-life segment. This means vast majority of population does not have insurance at all. Government’s decision to allow 49% FDI in insurance from the current 26% is expected to facilitate infusion of fresh capital into the sector, boost expansion and support fund availability to the infrastructure sector. It will give a wider platform and create more opportunities in the future.
What are the new launches?
We have recently launched our Smart Woman Plan. Online term is also picking up well. There are other products in the pipeline based on customer segmentation as well as a new pensions product both on Unit Linked and non UL platforms.
Product approvals have been problem in insurance companies? What are the initiatives taken by insurance companies?
Product approvals have been very slow. It typically takes about 6-9 months to get approval. Insurance companies have been demanding from the Insurance Regulatory and Development Authority (IRDA) faster clearances of products filed with it.
In a recent meeting between Finance Minister P Chidambaram and IRDA Chairman J Hari Narayan, a roadmap has been agreed upon for faster approval of products by IRDA. We expect the regulator will soon develop a mechanism for faster approval of insurance products, and hope that the growth will pick up in insurance sector going forward.
Are you planning to expand your business in Tier-II cities?
Yes, we are expanding in Tier-II and Tier-III cities. We can service our existing customers as demand and businesses picks up.
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