Comments
While the life insurance industry is seeing a decline in premium growth, HDFC Standard Life Insurance has been showing a steady rise in its premium numbers.
However, following the product revamp guidelines released by the insurance regulator last month, the life insurance industry will see a tough yet necessary period of transition this year, says Amitabh Chaudhry, Managing Director and Chief Executive Officer of HDFC Standard Life Insurance.
Edited excerpts:
The Insurance Regulatory and Development Authority (IRDA) has finally come out with comprehensive guidelines on life insurance products? How do you think they will impact the insurance industry?
They are very comprehensive, covering every risk area that the regular thought is a concern. They are now more stringent from an insurer’s standpoint. Obviously, the guidelines are very customer-friendly but there are some elements which look a bit impractical from the insurer’s standpoint. The cost of the implementation will be high and the benefit that the customer may get may not really be much.
If you talk to the industry they will say that some products are just not viable in the form and shape that they have been structured. But my point is slightly different. We can keep pointing to all the flaws, but the regulator has spent a lot of time in coming out with these guidelines which are an outcome of the actions of the insurance industry. Also, the period of uncertainty is over and now we have clearly-laid-out guidelines.
I think, overall, the insurance industry is not happy, but HDFC Life’s view is that we have only ourselves to blame and now we would like to work towards getting growth back in the industry. If there are some elements which are not making sense for the industry and which are making life very difficult for us, I am sure the regulator will reconsider.
Do you feel the time given by the regulator is enough for insurers to revamp their products?
The industry has had enough time to prepare, as we were aware that the regulator was working on the guidelines since February 2012. But, yes, the new norms will impact those companies that are already struggling and may need a longer period for transition.
But is six months enough to apply for new products and get their approval? Yes, I would say. It is going to be a period of transition, and a tough one, for the industry. But we need to move on rather than battle with the regulator to somehow postpone these guidelines.
Which category of products will be impacted following the regulatory changes?
The industry is complaining about index-linked products, because the IRDA has asked for non-zero return on these. If they are index-linked and if the index goes down why should the insurance company take the hit? The insurance industry wanted to launch index-linked policies to give policyholders another option. Now, the IRDA has introduced them in a form and shape where, on the face of it, I doubt many of them will get launched.
Tomorrow if there is a situation where the interest rate moves erratically, I cannot launch products based on events which I cannot predict. At that time, the shareholders will ask us what were you thinking when you launched the product and how are you going to manage your risk.
The market does not have enough depth to hedge and help us provide a non-zero return. I am sure when that happens the regulator will come back and take away this non-zero return provision.
While the life insurance industry has seen a decline in growth, how has HDFC Life been able to maintain its growth momentum?
Our numbers have been good for a couple of reasons. We have invested in a couple of channels, such as broking , which have been bearing fruit for us. We have a great partnership with HDFC Bank, and the investment we have made along with the bank is seeing decent growth.
Also, compared to others, our de-growth in the agency channel has been pretty minimal.
Our investment corpus is around Rs 40,000 crore, and it has been growing at 36 per cent this year. . We have caught up with some of the larger players.
So all these have obviously helped us in posting much higher growth than what the industry has, and this is reflected in the market share. Currently, the top four players in the private sector account for 83-84 per cent of the market share. So, there is a polarisation here.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.