HDFC Life keen to re-enter health cover segment but not indemnity segment: CEO HDFC Life

Almost all life insurers who have health products continue to serve existing clients but can’t launch new products or hawk existing products to new customers.
HDFC Life | Wikimedia Commons

MUMBAI: HDFC Life is not very keen on seeking a composite insurance licence, the amendment bill for which is pending approval from the federal lawmakers, but will re-enter the health insurance segment when permitted, a top official of the leading life insurer has said.

It can be noted that till 2016, life insurers were in the health segment, which has of late become the biggest contributor to the top-line of general insurers in the past two years, overtaking the till then mainstay of motor. Almost all life insurers who have health products continue to serve existing clients but can’t launch new products or hawk existing products to new customers.

“We aren’t very keen on seeking a composite insurance licence. As a group also, we are comfortable at the segments we are already in. I don’t see a merger of all our insurance businesses, if and when a composite licence is in,” Vihba Padalkar, the chief executive of HDFC Life, told TNIE here over the weekend.

She further said globally too, composite licence is not the prevalent practice except in some small Southeast Asian markets.

“Yes we are very keen to re-enter the health cover segment but we will not enter the indemnity segment,” she stressed.

In early June, industry leader Life Insurance Corporation had said it was planning to enter the health segment through a private health insurer by acquiring one of the five private standalone health insurers. Earlier, chairman Siddhartha Mohanty too had said the corporation was exploring “inorganic” options for the company’s new initiative in the health space.

"Internal work is going on,” he told the news agency PTI in late May, and that the company was open to exploring “inorganic growth” in health insurance.

The Insurance Act of 1938 does not allow composite licensing for an insurer to undertake life, general, or health insurance under one roof. The composite licence will allow all three segments under one entity, a move aimed at increasing insurance penetration.

Similarly, leading private player ICICI Prudential also said it was keen to re-enter the lucrative health segment, as it has the necessary capabilities because till 2016 it was offering health products.

Explaining her views on re-entering the lucrative health segment, Padalkar further said, she will not offer indemnity products though even when it reenters the health segment.

An indemnity insurance policy compensates the insured for certain unexpected damages or losses up to a certain limit, usually the amount of the loss itself. Such policies are designed to protect professionals and business owners when they are found to be at fault for a specific event such as misjudgment or malpractice.

It is advised that professionals in financial and legal, and financial advisors, such as insurance agents, accountants, mortgage brokers, and attorneys carry indemnity insurance.

“We’ll be looking at certain composite products that can be hawked as a one-in-all-product offering life, protection and local and overseas health covers etc. We will not be looking at all the products under the health space instead we will be comfortable offering niche products with multiple benefits,” Padalkar explained.

The beauty of a multi-offering product is that in the event of a fortunate death of the insured, the family need not run around from one insurer to another for each of the separate covers the diseased insured had.

However, she welcomed the proposal saying for health insurance too, allowing more players in the best way forward because, at 1 per cent of the GDP, this is way below the global average. Ideally, it should be 3 per cent of the GDP, she said.

However, it can be noted that health has the maximum penetration at close to 40 per cent—in 2022 it was 38 per cent with around 560 million health policies issued, thanks to the pandemic that has increased the awareness of health covers.

On the new Irdai rule on surrender value--which has massively increased the pay back even if the policy is only a few months old—Padalkar said this move will have a 100 bps impact on the margins as a whole.

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