Private sector insurer HDFC Life Insurance has managed to bring down GST changes impact on its Value of New Business (VNB) in the third quarter and is hoping to bring that down further in the four quarter this fiscal, says its Executive Director & Chief Financial Officer Niraj Shah. Shah says the insurer has introduced a clawback clause to realign its commission structure for ULIP plans with a large part of its distribution. Excerpts:
For Q3FY26, HDFC Life Insurance’s net premium income grew 8.77 per cent year-on-year at ₹18,242.39 crore. What all contributed to this growth?
During the quarter, individual APE (Annualised Premium Equivalent) growth was 13 per cent. Even for the nine-month period (9MFY26), the growth was 11 per cent. On a two-year CAGR basis, that number was 17 per cent. For the nine-month period, this is growing faster than the industry. Various lines of our business constituted the growth number for us in Q3. But the two numbers we look at are – individual APE and credit life business on the group side which grew 25 per cent. Within the individual APE, the most heartening number was individual protection, which grew 70 per cent Q3. Individual commercial also grew very strongly at 55 per cent for the quarter and 33 per cent for the nine-month period.
Was the high growth in individual protection segment due to GST exemption on policies?
Even prior to GST, we were growing protection at 27 per cent. And GST (exemption), of course, has been a fillip to that. So, for the nine months, that individual APE term growth was 42 per cent.
What other products got sales boost due to the GST cut?
Protection has seen the maximum impact. For the rest of it, I think it will take some time for customers to realise that the products are a lot better in terms of the cost – the cost to the customer is lower on account of these changes. But, it is most easily visible in a protection product. For the rest of the products, Unit Linked is also doing quite well. There is also a significant improvement because you pay lower charges. But, I would not attribute that to GST. So far, it is primarily on the individual protection side.
For Q3, VNB growth was hit on account of GST change. What is the outlook for VNB margin this fiscal?
Given the impact of GST, VNB growth for Q3FY26 was 3 per cent. Otherwise, the number would have been 13 per cent. The margin stood at 24 per cent for the quarter and for 9MFY26 it was 24.4. The GST impact on an annualised basis was 300 basis points for us, and we had said that we would try and bring down the impact to close to 200 basis points. That is what we have managed to do.
So, the GST impact, we have narrowed it down to 190 bps now, and we are hoping to bring that down further in Q4. So, if you were to take out GST impact, the margins are actually expanding. We will try and bring the margin as close to where we started the year at, but will still be lower than the starting point, given that this has been a fairly large change that happened in the middle of the year. We will try and keep the margin in the 24 per cent range by the end of this financial year.
Have the company’s interactions with distributors on revision of commission structures concluded, as insurers are now not able to claim input tax credit on commissions and brokerages?
Yes. So, we had basically said that we will do this on a selective basis. We have instituted a clawback in place for the Unit-Linked products with a large part of our distribution. And that is in line with what we had done for traditional products last year after the new surrender value norms came. Of course, there are some ongoing conversations, but a large part of the conversations have been concluded. There is no cut in commission for the ULIP plans. If the renewal premia do not come in, then the commission that was paid upfront gets clawed back. So, there is no reduction upfront. But this allows everyone to focus on persistency, so that the renewal commissions can be continued in the second year, third year onwards as well.
