HDFC Life Insurance is looking to stay from group term insurance business. This is on account of rising commoditisation of the product.
Vibha Padalkar, MD & CEO, HDFC Life told analysts that the company has been cautious on the group protection business.
"We were doing risk-based underwriting rather than one-size-fits-all model. We stay away from group term insurance unless we understand the counterparty very well and are comfortable with the risk," she added.
In Q1FY22, group protection business was Rs 740 crore compared to Rs 940 crore in FY20. FY21 saw the group protection business of Rs 250 crore, however this period was an aberration due to COVID-19 lockdown.
Explaining further, Padalkar said that group term has become a fairly commoditised product.
"We haven't been successful in making money there. It is because even one additional death can throw your pricing out of gear. So we have stayed away from that," Padalkar added.
As a whole, Padalkar said that while growing protection isn't difficult, making reasonable returns in protection is fairly difficult. Hence, she suggested that a calibrated approach in this segment is the focus.
An Emkay Research report said that HDFC Life is avoiding group protection plans due to the lack of profitable underwriting. The report added that this stance was because group term insurance continues to become a commoditised product, which requires fine pricing apart from effective mortality experience.
Group term insurance is a group insurance product for companies where the insurer pays for death of an individual within that group/company during the policy tenure.
Overall, when it comes to the protection business, HDFC Life has said it continues to view a long-term opportunity in the protection business in a calibrated manner, with strong medium- to long-term prospects of this business in India.
"It expects around 15-20 percent growth in the business, given a calibrated approach and strong underwriting in place," an Emkay Research report said.
