Crisis will increase awareness on need for Cover: HDFC Life

Covid-19 has put the spotlight on the need to insure lives, and the pandemic could well be the “penny drop” moment for an industry that had hitherto struggled to sell protection products in a country with one of the lowest rates of insurance penetration among large economies. “There is now a slow realisation dawning that if you start early, the policies don’t cost much,”Vibha Padalkar, CEO of India’s biggest private sector life insurer HDFC Life NSE 0.64 % , told ET in an interview. “This is a penny-drop moment for life insurance, especially for term products,” she said. “We always compare how Chinese insurers have over 50% share of term protection while for India on a weighted premium basis, it is in single digits. This could change with the pandemic and we are definitely feeling a pull.” While demand for life insurance has picked up due to the pandemic, there is also the question of the economic impact of the virus on the spending power of consumers. The penetration of India’s life insurance market at 3.7% is quite low against the global average of nearly 7%, pointing to significant growth prospects for low-premium protection covers. Padalkar said that the industry would also have to realign financial strategies and innovate to stay on top of consumer behaviour shifts brought about by the pandemic. “Endowment plans give topline, and other products contribute to the bottomline,” she said. “Protection, for example, if done sensibly, can be quite a high profitable business. However, three protection policies need to be sold to match the premium that a single endowment product brings. Therefore, we have to balance the mix.” August saw a 15% growth in new premiums for life insurers. This was after four consecutive months of contraction. For HDFC Life, the growth in new premiums for August was 44%, data from IRDAI showed. Meanwhile, HDFC Life has processed 235 coronavirus death claims worth 22 crore in the financial year. It had set aside a pandemic-provisionary fund of 41 crore. Padalkar said that the impact of the virus on the life insurance industry on claims was not as adverse as its non-life counterparts as the mortality rates are low. “Studies have shown that the overall deaths in general have gone down,” she said. “This could be because of reduced accidents, which to an extent has had a neutralising effect on the impact of coronavirus.” On the impending listing of the Life Insurance Corp of India (LIC), Padalkar said that it was a “welcome move” as it would bring about more transparency on the insurance sector’s valuations. “The listing of LIC is of utmost importance as it’s the largest financial institution in the country. It’s not a welcome situation, even for India Inc, where the largest FI is unlisted,” said Padalkar. “Like it did for us, the listing will bring more vigour to LIC as well.