HDFC Bank Limited (HDFCBANK) Earnings Call Transcript & Summary

Hi. Good morning, everyone. Thank you for joining us for the PL Insurance Conference. It is our privilege to welcome Mr. Gunjan Sharma of HDFC Bank, who is the Head of Life Insurance Products and is a Principal Officer, Bancassurance. He has been in charge of Life Insurance Products for more than 9 years now and he's Principal Officer for more than 4 years. He's associated with the bank for more than 30 years now -- 13 years now. Mr. Sharma will spend some time on giving his comments on banca and insurance side. And post that, we'll have a session for a few questions from Mr. Sharma -- for Mr. Sharma. Thank you. Over to you, sir. You can go ahead, sir. Mr. Sharma?

Yes. Thank you, Pritesh. I hope I'm audible to everyone, and again, thanks. Good morning, everyone. I want to thank Prabhudas Lilladher team for giving this opportunity and a warm welcome to everyone. Over the course of next 1 hour, I'll try to like Pritesh told, cover some of the pointers related to our bancassurance business and also subsequently, would be more than happy to address some of the queries that you will have. Well, I hope that over the next 15 to 20-odd minutes, I'll try to cover as many points as possible and address some of the queries that you already have, but still open to questions after that. Now before I go into our bancassurance business per se, a quick look at the IIDA numbers published for this year, particularly. We all know this year has been different from the earlier years. And hence, if you look at what IIDA says and how the industry is performing. It shows quite an interesting trend. In life insurance, particularly, with the kind of degrowth that we were seeing in the beginning of the year has kind of -- that percentage degrowth has kind of melted down. The gap is reducing. And like from a 30%-odd degrowth in say around May, we've come down to, say, around 7% degrowth. And obviously, LIC had a big role to play there with the narrowing of this gap. In non-life, the growth has been -- or de-growth has not been that heavy driven mostly by the health insurance growth over the past 4 to 5 months. So this is where I saw it's quite interesting. And while optimal numbers are not published, evenly await for optimal numbers as well on the insurer side. Coming back to our bancassurance business. Now it's fifth year into the new regulations where the regulator allowed corporate agents to have multi tie up. And for us, it is fourth year into the new regulations as well. And hence, a good time to reflect on the journey under these new regulations. I'm sure most of you would know, the -- we were the first bank to wholeheartedly adopt the multi tie up distribution model. We were the first one to tie up with insurance partners across life, non-life and health insurance as well. As we speak, we are again amongst the very few banks, and I'm not even talking about the distribution side, we are one of the very few banks to have a multi tie up structure in its truest form. Now what was the objective to get into multi tie up? Now obviously, if you have 1 partner for life and non-life and you were increasing the number of partners, the first objective would be to give more options to the customer to have a method where the product bouquet increases. And that was the very first objective with which we tied up with partners like Tata, Birla in addition to the existing partners in life and others in non-life as well. Now with the increase in -- natural increase in distribution, with the increase in product bouquet, very clearly, the objective was to increase the overall pie of the business as well. I'm not even going into the number growth that we have seen over the last 4 years, that I'm sure is well known to everyone. But the increase in product bouquet and hence increase -- overall increase in product pie. 1 plus 1 should not be equal to 2 was the clear objective that we started off with. And at that point of time, somewhere in FY '17, we already had an integrated system. I'm talking about digital initiatives, some of the digital initiatives that had started prior to that. And we were quite well positioned to integrate, to have the digital initiatives with our new partners as well. So that was the very -- we felt it was the right time to get into multi tie up with a customer point of view and increase the overall product by on offering to customers. So again, like I told, it's fourth year, and we feel that across all the stakeholders, whether bank, insurance partners and customers, this open architecture has served well for the customers. And hence, to a large extent, the objective of getting into an open architecture is quite well positioned from that perspective. Again, we talk about digital journeys. Into the fourth year, the first year in the open architecture model and something which is close to everyone's heart in the bank was about ensuring that the quality processes are in place with the new partners as well. And hence, first year into open architecture was a two-pronged strategy to get digital initiatives integrated across all levels as well as ensure that the quality processes that we have, the quality checks that we have. And like I told, this one aspect in bancassurance business is close to everyone's heart in the bank. We were very keen that those are well integrated as well, along with the digital initiatives. I will touch upon some of these aspects related to what focus do we have on quality in bancassurance business later, but these were the major focus items in the first year. The results started coming in the subsequent year as well. So obviously, each of these partners would bring specific opportunities, specific strength to the table. And along with the distribution that we have, we tried to offer these solutions to the customer as well across all the 4 categories, whether it is protection, whether it is health, whether it is savings or whether it is long-term investment. So we feel that all the 4 requirements and annuities as well. All the 4 to 5 requirements are well met across the product lines that we have across the insurance partners. So that was the objective that we started. And over the last 4 years that has been the focus. I would want to touch upon -- Pritesh told me earlier about what makes HDFC Bank different than other bancassurance player. Now without going into what others are focusing on, I would talk about what we are focusing on. The first focus in bancassurance business for us is the quality of business that we solicit, with the kind of quality checks that we have. And I would want to spend some time on that aspect as well. I would touch upon the digital initiatives in the latter half of this address. But on quality side, we know insurance is -- insurance solicitation is one of the toughest solicitation across financial products. It's a promise to the customer. And hence, right from the beginning, even before the open architecture was adopted by the bank, we were very sure that some of those quality standards have to be best-in-class. Now what are those quality standards that we focus on majorly? We were the first one to introduce a method where every proposal that is submitted to insurer at that point of time and insurers later, right, we were the first one to ensure that every proposal is checked before a policy is converted on recorded line. The method of verifications have only been enhanced over the period of time. Today, not just through a call recording, you would have verification done through video recording as well across insurance partners, which will be further checked after the proposal is submitted and would ensure that there is an independent back end check of all these proposals. We were the first one to introduce declarations across hierarchy -- across sales hierarchy for all the proposals and particularly so for some of the sensitive categories of proposals that we felt requires not just a seller or the supervisory declaration, but also go and have a L2 level declarations. These are very much in place across every single proposal that is solicited through digital integration. And we also ensured that some of the sensitive demographic details are hard coded for every customer. As we speak, if there is an insurance proposal that is solicited from the bank, whether it is through our net banking platform, whether it is through our tab journey, whether it is through WhatsApp banking, every detail is hard coded as per the bank record, which we felt is very important to ensure that the verification is done with the correct customer, with the correct proposer. And these are pre solicitation, some of the pre solicitation or during solicitation checks that we did. After solicitation, there is a check related to premium to -- that are -- apart from the normal underwriting that happens for an insurance proposal, there are checks related to the premium paying capacity. There is a suitability metric for every customer, which ensures that as per the age, as per the income, as per the demographics, which are the best suited products for those customers. And obviously, like I told about the verification process as well. Then there is a method post solicitation as well. Even after a proposal is issued, and whatever I'm saying is applicable across insurance partners, not just 1 insurance partner. Even after the proposal is issued, is converted, right, there are back end checks across close to 20 to 25 parameters that we independently do for those proposals. And if there are queries, we do ensure that the queries are answered either through insurer or either through our sales team. So these are independent checks as well. And like I told, one of the biggest integration that we did right in the beginning was we ensured that some of these demographic details are hard coded and captured as per bank records. So today, if there is a proposal to be solicited, the details have to be as per the bank record. And if it all has to get changed, first has to get changed in the bank report as well. What are -- so this, to me, is the biggest difference that we as bancassurance players have in the market? Our focus on ensuring that every single proposal is thoroughly checked apart from the underwriting that the insurance company does. And I reiterate that the focus -- this is work in progress. I would love to talk about how we have even evolved in this journey. But I understand there is paucity of time. And hence, I wanted to give this overview to everyone present in this call. The other single -- the other biggest enabler has been our digital integration. We are the largest -- all the products that are to be solicited are available -- are on digital platforms as well. On our net banking, we have recently introduced WhatsApp banking as well. And it is well integrated with our chatbot EVA as well for both sales as well as service perspective. These digital integrations have been there for some time now and obviously plays a huge role for insurance solicitation and again across both life as well as non-life insurance. The third biggest enabler that we feel we have is a large distribution force. We take a lot of focus in ensuring that the sales force is well-trained. There is a defined -- not just about IIDA or the insurance certification that is mandatory for anyone who solicits insurance business. We go a step ahead and ensure that there is a defined code of conduct that every person who is about to solicit insurance business undergoes as well. There is a separate certification related to code of conduct as well. Now obviously, with new product lines that are introduced by the regulator around point-of-sale, around simplified products, the focus on increasing the distribution has only gone up, right? And we do take a lot of pride in the fact that our distribution and I'm not even talking about branches or channels. When we say distribution, it is at a person level. It is not a branch, but people in the branch. That distribution is one of the best. So that -- these 3 things; the focus on quality, the digital enablers and the distribution that we have at a personal level, at a staff level are 3 biggest enablers, differentiators for us as a bancassurance partner. Now there are -- obviously, this year, and I'm sure a lot of you would have queries related to this year business per se. And I don't want to spoil the party by addressing those queries upfront, but I would try to catch up on those points as well. Now what has been a key differentiator this year? In fact, I would tend to believe that there was no major change in the overall structure. There was no major change in the overall strategy this year as against last year as well. And like I told, we were, I think, very well positioned, even before the situation on the ground came up, we were very well positioned to ensure that the solicitation methods, the tailings are in place. And I want to give examples like something like a preapproved sum assured. Now I see a lot of focus being built on an aspect like a preapproved insurance to a customer. That is not something that we started only because of the situation this year. This has been in place for the last 4 years or so. Obviously, the focus on this aspect increased. Banking is a part of essential service, ensuring that the staff was reaching out to customers for their well-being and those initial interactions in April did help us to understand that there is a requirement of protection that is increasing during these times. During customer interaction, during customer meeting or during our customer calls, there was a clear requirement that where customers were inquiring about protection, whether it is life, whether it is health or whether it is protection through some of the savings plan. Now, obviously, the focus was on protection. And like I told, even for savings plan, there is an inbuilt component of protection, obviously. So protection as a theme was very clearly visible during the customer interactions asking their well-being in April. Now with the digital platforms that were already there, it only helped us to ensure that those needs are addressed and addressed in a way that we have been doing over the past few years. So in that sense, whatever we did across insurance partners over the last 4 years helped us to engage with customers in a much, much better way. And helped us to ensure that there is -- that those needs are addressed, and obviously has helped in the overall business as well. Again, while IIDA reports are published, you would see that the growth for our insurance partners has been substantial as well for -- across our insurance partners. So this was one such enabler, which was already in place. I spoke about preapproved sum assured. What it did, and we went a step ahead and ensured that the systems are well integrated to have a preapproved sum assured in its truest form. It was not to go and tell the customers about having a preapproved insurance and then finding out that the process is stuck or the proposal is stuck or the journey is stuck because of some of the other reasons. We ensured that if we are going to the customer, that journey is well integrated into the insurer system as well to ensure that a pre-approved is pre-approved in its truest form, and the proposal does not get stuck in any underwriting queue. So that helped us to actually meet some of the requirements because early on, and I'm sure you would agree, early on there was a large customer segment that wanted to have a protection, whether it is life or health, but were quite wary of going out or even allowing someone to walk in for issues like medicals. So a preapproved sum assured journey did help us in that regard. So this is where it helped this year. Obviously, when we look at over the last 4 years, one of the biggest enabler in the overall journey, and I take the liberty of talking about the industry and not just about the bank. One of the biggest enabler has been the fact that the visibility around protection as a theme has increased. And it is not just in the rural segment or in the semi-urban segment, it has increased, thanks to a number of initiatives that the government took. So if you look at the last 4 to 5 years, particularly, you had schemes like Suraksha Bima, you had schemes like Jeevan Jyoti Yojana, you had schemes like Atal Pension, you had schemes like Jan Arogya, Fasal Bima, you had schemes like Saral Bima that the regulator has recently come up with, you had schemes like AYUSH. So all these things combined did help to increase the visibility of insurance across population. And obviously, as a distributor or even as an insurance partner, these things do help if a customer as against say what he was -- where he was in terms of insurance knowledge account 5 to 6 years back and where he is in that context. It does help that the visibility, the knowledge, the communications around insurance has increased over the last 4 to 5 years. And it has helped, I'm sure, everyone across the industry. And that has been one big enabler. Not for a moment, over the last few years, any insurance professional, any bancassurance professional would undermine the role it has played in visibility or in creating awareness on insurance. And like I told in the beginning of my address, insurance per se is a difficult promise to -- a difficult product to solicit. It's a promise that we give to customer. If a customer during the process, during the course of the time becomes more aware, becomes more knowledgeable, I'm sure it helps the overall industry as well and that has helped us as well. Going forward, I wanted to touch upon what, in our view, would be the biggest enablers, and I'm sure as industry experts, some of you would have also looked at these aspects very closely. With the kind of growth and -- as life insurance per se, and I'm talking about life insurance growth over the last 8 to 9 years has roughly seen a 15% CAGR over the last 9 to -- 8 to 9-odd years. Again, this year has been different, obviously, because of the kind of prevalent situations. But with the kind of growth and with this kind of growth as well, you look at aspects like insurance penetration, you look at aspects like insurance density. We are an under-penetrated country as far as insurance is concerned, whether you talk about health insurance, whether you talk about life insurance. And with the growing awareness, growing knowledge and with a lot of efforts that the government is also taking this awareness, this knowledge, this penetration, this density is only going to increase, is only going to grow as we move ahead. So that is the overall industry aspect. Obviously, there is a clear demand for protection that I spoke about. There is life insurance as a percentage of savings is growing consistently. Corporates as entities are looking at the protection as a theme for employees as well. So that is one clear growth area that is visible. I spoke about some of the new product lines. IIDA, the regulator, allowed some of the new product lines to be for corporate agents to distribute. This includes point-of-sale product as well. They have recently come up with Saral Bima Yojana. So a lot of focus on increasing the distribution, increasing the product bouquet, not just from the insurance partners, but also from the regulator and from the government. All this combined would only help in the industry to grow in the coming years, and we would want to obviously play a role there in growth and ensuring that the customers are well protected. One of the very interesting aspects that I see related to insurance is the opportunity it gives for customer life cycle management. And I was reading some report where -- and obviously, it's quite natural. Because if you look at an insurance offering, something that would start from say a protection, right, to probably a milestone protection or milestone coverage to health, to savings and to annuities as well. If you look at it, there is a complete life cycle management that happens in the journey. And during the course of this life cycle management, if we are well engaged with the customer, obviously, on an average, a customer would tend and these are the -- some of the reports that I referred to, a customer would more tend to take 4 to 5 insurance product during the life cycle journey. More product, more innovation, more awareness would only help in increasing this penetration. So that is one unique benefit that insurance as product offers, which is where will only again help as we move ahead going forward as well. So life cycle management does help. There is -- I was reading one of the inputs, analytical inputs, there is a positive correlation between an active insurance customer and the banking relationship for the life cycle as well. So this is where I think insurance is a product differentiator. And with the increasing demand, you only see the growth going up. So these are some of the points that I wanted to cover. Obviously, like I told, we have 9 tie ups, which is the maximum the regulator allows and each of these partners bring different product innovation, bring different process innovation and whether it is digital, whether it is quality checks or whether this is distribution, these will always be work in progress for us. So these are some of the points that I wanted to cover. Pritesh, more than happy to have some of the queries in case anyone or you would have.

Sure. So before we start the Q&A, I had one small question. So basically wanted to check from you that how do you communicate from up to the lower level in terms of products and design and how to recommend it to the client. Of course, the client-centric option does come in, but quite a lot of products are quite similar in nature. And how does one make a choice at the lower level is what I had, if you can address that query, and then we'll move toward a query.

Sure, Pritesh. So let's start right from the time a product is launched. Now before a product is launched, there is a detailed process we have in place across insurance partners where centrally across different departments there would be a clear understanding of what the product is all about, what is the USP of that product. Obviously, the -- we have staff to staff marketing at an advanced level or at a channel level as well from the insurance partner side who would be responsible in ensuring that there is a detailed documented process around product training to every staff on the ground who would be soliciting or would be involved in solicitation of those products. That is on the training part. Like I told, there is a suitability metrics that we have. Now obviously, given the fact that these products are approved by the regulator, and are in line with -- for that particular segment. And when I say segment, it is the minimum or the maximum age, all those things are obviously taken care of by the regulator or by the insurance company as well. Beyond that, like I told, we have a suitability metrics that defines as per the demographics of the customer, income, age, life cycle and requirement. The requirement could be protection. Now that is where all the term plans come into play. The requirement could be protection with savings. That is where some of those savings plans come into play. The requirement that the customer highlights could be that of retirement planning. That is where all the pension plan comes into place. So there is a defined product grid, which is always reviewed at the time of product launch. So that is one. The product communication that we have would always be the ones which are approved by insurer. And obviously, as a part of their approval process by the regulator as well, which will always be co-branded and the product -- so we ensure that there is a tight control over the kind of product communications that we are sharing with the last person on the ground as well. There is a documented process. Obviously, within all this, one very interesting aspect would be the fact that an insurance partner might want to come and would want to focus on any specific product. For this, we involve our research team as well. So the research team, independently, the bank research team independently communicates with the insurance partner and understands every nitty-gritty related to that product. And obviously, they are the experts as far as understanding the product structure or deep diving into the portfolio of that particular product into their understanding of their investment. And that is where we get an independent check done by the bank research team as well. If they approve, there is a research note that is prepared across the -- with the insurance partner, which is independently shared with the field as well. So some of the -- for the specific products where the request will be the call is not taken by the channel, the call is not taken by the product team, the call is taken by an independent research team. So across these 3 to 4 players, we ensure that the product communication, the product training is a water tight process across entities. And like I told, at the last level, through our communications and through a well-documented communication with the insurer, we ensure that the product details are there in place.

Sure, thank you.

Thanks.

Yes. Mr. Sharma. This is Kalpesh Parekh here. I'll ensure that probably there is a smooth functioning of Q&A session at our end.

Sure. Thanks, Kalpesh.

Yes. So we would like to invite everyone to please raise a hand if you want to ask question to Mr. Sharma. We'll just sort out the things and probably will give you a preference accordingly.

Hello? I'm sorry. I can't find a reassigned question. Can I go ahead with a question?

No problem. Yes. Go ahead.

Yes. Am I audible?

Yes, you're audible now.

Audible now, yes.

Yes, excellent. Thank you so much for taking the time in talking about the bancassurance channel, it was very helpful. I have a couple of questions. First one is a little note on how you think about the customer wellbeing kind of manage it with your own objectives, right? And I will tell you where I'm coming from. If you look at 2 things, right, persistency of the bancassurance standard of HDFC and presume a majority of HDFC Bank and if you look at savings persistencies, right, both by the third year reach about 70%, savings product persistency at the HDFC Life and bancassurance channel persistency for HDFC Life, which would largely be HDFC Bank. What that sort of implies in a way is that a majority of the saving or traditional savings product, 30% of that money which was invested is largely lost because in the traditional savings product, if you sort of back off at the second and third year, you have a large loss, right? Now what it means for HDFC Bank's customer is that he's lost a lot of money. What it means for the HDFC Life, the manufacturer, is that they didn't make a lot of money. But what it means for the channel is that the appropriated fair bit of value is [Technical Difficulty] because the early commission that somewhat -- more than somewhat better, right? How do you think of customer? And how do you -- I mean, one of the questions that we have or I have rather is that if customer loses value then over time, the channel that is sort of making the customer, advising them to invest sort of -- will also over time sort of lose value. That is a one question. And related to it is that you talked about the fact that if you look at what kind of products in some ways are suitable for what kind of customers. So that is a big piece of [Technical Difficulty] channel, right? How do we see that in the light of persistency, would you benchmark yourself to others and sort of talk about how much better you are versus what others do? So I mean because outside, hard for us to appreciate what you're doing. Unfortunately, we are driven by what numbers sort of show as we don't have comparables to kind of necessarily know, right? So these are -- this is the kind of broad question that I have.

Okay. [ Akshay ]. Thanks, [ Akshay ], for putting it across. Now I would not want to go into a specific insurance partners' number. Now obviously, these are the numbers that are well visible with insurance partner. But at the same time, as we speak, right, we have 3 partners in life insurance, and I'm assuming that you were talking about life insurance. On persistency, again.

Yes.

So I would not want to go about HDFC Life persistency, say vis-à-vis Tata or vis-à-vis Birla. And at the same time, I would want to explain the points related to, I think, the regulator as well as with the product modification done over the last 4 to 5 years has been very clear about the fact that if a customer has not paid in the second to third to fourth year is well protected with some kind of -- not a complete erosion of the value that is seen. That is one. Secondly, if you look at the journey, per se, over the last 5 years. And again, without going into specific of what the product mix has been for a particular insurance partner, right? The product mix over the last 4 to 5 years has seen a dramatic change as well. So when you talk about a customer in the fourth year of his policy currently would be very different from a person who would be in fourth year of his policy, say, 3 years down the line because the product mix itself has gone -- undergone a change, which I firmly believe is for the betterment of the customer. It ensures that there is a customer stickiness. And at the same time, what I would want to touch upon and like I spoke in the beginning. What I want to touch upon is how we ensure that every customer, right, is touched upon at the time of renewals as well. So today, and not to mention the fact that every customer is spoken to, there is a clear process in place, where there is -- where he's not just underwritten. That is a part that the insurance company does, but is set on the premium paying ability, is set on the other aspect of the sale as well. However, if the customer does pay the renewal, every customer is spoken to separately outside what the insurance company does and feedback taken. And like I told, over the last 4 to 5 years, product mix per se has played a huge role. A shift in product mix has played a huge role in increasing or in enhancing those levels as well, right? Obviously, and like I told, this will always be work in progress, right? Our objective is to ensure that we reach a 95-plus. This will always be a work in progress to ensure that we reach those levels of parameters as well. And again, you spoke about commission and likewise. I would firmly believe that whether it is product structure of ensuring that how a product would behave over the course of journey if the customer has not paid or whether it is those commissions. IIDA as a regulator has very clearly defined process on all those, right? What we do over and above those regulation is to ensure that the quality processes are in check, where every product is solicited is in line with the customer need. And if the customer does not pay, there is a clear documented reason as to that customer not paying that premium. And like I told, this will always be work in progress, always.

Sure. Sir, a small follow-up on that. Is that -- like you said, there's a clear documentation of whoever sort of drops turns out, right? Of the, let's say, from the first premium to the second premium, let's say, a 15% ish dropout, for example, right? And I don't know the number, but let's say, theoretically, whatever that right number is, right? But a percentage of the dropout is driven by the customer saying I don't think the product was good enough.

Okay. [ Akshay ], like I told, I would not want to go into specifics on the percentages for bank business. But at the same time, if you heard what I told right in the beginning, without going into a specific percentage, we do take a lot of pride in the fact that some of the quality ratios that we have are best-in-class.

Sure. And if I may ask -- if there is a big queue. I can come in later.

Yes, yes. [ Akshay ], because there are -- there is a long queue. Just a one request from us that probably you can introduce yourself before asking a question because that will help the presenter also. Mr. Sridhar Sivaram, you may now begin.

Yes. This is Sridhar from Enam. You spoke a lot about protection in your initial remarks and how you give stress to protection as a product. But when I look at the overall numbers, and we have the Q2 numbers and we have the previous year numbers also. Protection as a percentage is a fairly low number. And in the Q2 itself, for most of the insurance companies who have declared the results, including HDFC, protection has actually come off. And what is selling is actually the savings product, and in particular, these assured return products. So it looks like bancassurance partners like you and others are using an easy way of selling a savings products rather than selling an insurance product. So can you just comment a bit? Is it that the customers are not wanting to buy protection? Or is it easier to push an assured return products, which easy for partners to just go and sell that you get 6% assured return for next 20 years. What exactly is happening? Why is the industry not able to sell protection?

Okay. Thanks, Sridhar. Interesting that you asked this question, but again, just for the benefit of everyone, I would like to reiterate that in bancassurance, we have 3 insurance partners. So again, what HDFC or others would say would be specific to those companies and somewhere the ratios could be different as against what, say, a particular insurance partners would say. Having said that, Sridhar, I would try to answer the question related to protection. When I spoke about protection as a clear underlying requirement that came starting -- particularly starting April this year, right, obviously, it reflected in some change in our product mix as well. Now again, I would not want to comment on what a specific insurance partner has as a product mix because we operate or we distribute -- we -- there are 3 insurance partners for us. Every insurance partner, and it is quite an interesting fact, every insurance partner would have -- would not have similar or the same product mix. And that to me is the benefit of having an open architecture. So while there will be a partner that would be heavy towards protection, there would be a partner that would be heavy towards par. There would be a partner that would be heavy towards nonpar. So just for an example. Having said that, when I say that there is a clear -- there was a clear underlying requirement for protection, right? Obviously, some of the customers would not just require a pure protection, they would require, say, long-term protection with savings as well. But the percentage of customers who require a pure protection has also gone up. And in fact, that is one product category where across -- if you go to every insurance partner or any insurer for that matter, they would be the first one to raise their hand and say that, yes, the requirement for protection has increased. And with that, the requirement of pure protection has also increased and the percentages have changed. So without going into specifics, and I'm not even sure about overall what HDFC Life has communicated. But as a bank, when I say that there is a requirement that reflects in the product mix as well, particularly as compared to the last few years. And obviously, there is a refined customer segment who would always want some kind of savings, coupled with protection as well. And as long as this is in line with what the customer wants, I don't see any issue in the product mix that we would have or, for that matter, any insurance company would have.

So HDFC Life numbers are public. So in that respect, it is not something that you or I am giving out from anywhere, it is there in the results.

Exactly.

And they seem to have had a disproportionately large growth in their assured return product, almost 250% growth in their assured return product. So it seems like that is a product that customers are wanting. Is that how we should understand?

At any given point of time, Sridhar, and I'm again talking about our processes, at any given point of time, the product mix would always reflect what a customer is wanting. So in our product mix, whatever percentage, protection, par, nonpar, ULIP, retirement would have, it would always be a reflection of what the customer is wanting. So yes, to answer the last part of your question, would it mean that in the context of our product mix, is that what the customers are wanting? Very clearly, yes.

Next in line is Harshit. Harshit from Premji.

Sir, 2 questions. One is that what is your view on using the competing bank brand products, for example, if it's an ICICI Lombard platform, how do you see that as a channel?

Harshit, can I just intervene. I'm not able to hear you clearly. So you probably need to be in a better network or speak louder?

Is it better now?

Harshit, it is echoing a little bit so can you just...

Yes, sure. Is it better now?

Yes.

So I was talking that, what is your opinion when you look at competing bank brand products, for example, ICICI Lombard as one of our partners, in that case, how do you see the channel distribution? How do you see that preference over the others? And the second question is that when we look at a typical relationship manager for HDFC Bank, how important is insurance as a product, when we look at his incentive structure? Would it be fair to say that 40% to 50% of its incentive gets accumulated because of insurance products?

So I would not want to answer the second part of this question, Harshit. That is not for me to answer. The first part is very -- I heard you talking about ICICI Lombard. We don't have a tie up with ICICI Lombard in non-life. But having understood what you were referring to, is there any specific preference for any of the partners? Very clearly, the answer is a big no. All our partners are -- and like I told, if you recall what I told right in the beginning of my session, the first year of the tie up went into ensuring that all the partners are equally placed as far as digital integration is concerned from their perspective. And from our perspective, ensuring that some of the processes that we have independently are well integrated into their systems.

Sir, I understand. Just wanted to ask that Bharti AXA is your partner.

Bharti AXA, yes.

Right. And given the things which have been happening around that ICICI Lombard is acquiring Bharti AXA, possibly. And in that case, obviously, you will have to take a decision whether you want to keep ICICI Lombard on hold or no. So I just want your views on that.

No comments, Harshit. I mean this is a speculation that you have heard, this is a speculation that we have heard, so listening. And on the scorecard, there is a clear compliant method that we have, which is weighted scorecard, not related to any specific product. So again, without going into the details, a product would not be important in that scorecard because it is a weighted score card across sales, nonsales parameter as well.

So does a competing bank product is the fact that it is a competing bank product, is that a weight in the scorecard. So I'm just asking that if product profile is right, that is something which is suitable to your customer segment, then will you be willing to onboard ICICI Lombard as a partner?

Like I told, Harshit, for -- at the expense of repeating myself, these are something that you have heard, I have heard. And again, I will not be the right person to address that because, again, these are speculations and not even a concrete input.

Next in is Dhaval Gada.

Yes. Gunjan, I had 3 questions. First is just to understand on the non-life part of the distribution. So I understand that the bank -- I mean the size of the life insurance business versus what we contribute on the non-life side is significantly lower, and also the growth rate was last year, about 3%, 4%. So what I wanted to understand on this part was, typically, health is something which is very strong part of the relationship as term insurance would be. So what is the challenge in non-life from a health insurance business perspective? And why agency is a big contributor to the industry compared to bancassurance? So some thoughts around that in terms of distribution challenges. The second related part is on the SME side, the bank has a huge SME business. And it's a very big cross-sell opportunity on the property insurance and other non-life products. So again, I wanted to hear your thoughts as to where are we on the penetration journey on this front? And again, what are the challenges to scale up this business opportunity? So that is the first part, just understanding the challenges and opportunity in the non-life side. Second, I wanted to understand was on the geographical mix of your life and general insurance versus let's say 4 years back.

Dhaval, we lost you.

Yes, yes. Sorry, I got a bulb strike. So I was just saying that we just wanted to understand the geographical mix of the life and non-life business versus 4 years back when you started the open architecture journey. And if you can comment a little bit around potential penetration opportunity, I'm sure you would have done some exercise to understand what is the addressable market based on the grid that you formulated. So just some thoughts around that. And the last question that I had was what percentage of your sourcing today comes from pre-assured -- pre-approved sum assured products? Yes, those are the 3 things.

Thanks, Dhaval. As soon as you highlighted that you have 2, 3 questions I started noting down to ensure that I don't miss out on those questions. But I'll try to address some of those. As far as non-life is concerned, across insurance partners that we have and the contribution is very heavy in terms of what we contribute to the overall business, again, without going into specific. Obviously, there are some segments on which a non-life per se would be -- you would be knowing is very price sensitive, particularly for corporates. There are some segments where even from an insurance side of it, some of those proposals are price sensitive without going into specifics. Health insurance, you pointed out, and something, again, like I spoke about product mix in life insurance, product mix in non-life also has undergone a significant change as far as the health requirement of this is concerned. So while you did point out last year and again, on the insurance partner, this year, health as a particular category has seen a very clear demand in non-life and across customer segments. SME, you spoke about very clearly that has been the focus as a preferred bank for a lot of those SMEs and that continues. In terms of -- I think the second part was around geographical mix. And I understand from geographical mix, you would -- you referred to metro, urban and semi-urban if my understanding is right?

Correct. Correct.

Okay. So over the last 4 years, and like I told, the very clear strategy or the very clear business processes every branch would have a trained staff to solicit insurance. So very clearly, if there are new branches, new distribution opportunities coming up in any geographical area, right? This would be -- this would correlate with the insurance distribution as well. So obviously, there has been an increase in a lot of locations where we have expanded our distribution as bank. And again, without specifically going into the percentages that has mirrored the expansion that we have had as distributor for insurance as well, very clearly. On PASA, you wanted a specific percentage of the business that we do. Now Dhaval, again, without highlighting a specific percentage, what I can say is because the engagement, this has been a good engagement tool with the customer, well accepted, well received by the customer. This has proved to be a biggest enabler of our business with a double-digit contribution without going into specific percentage.

Next in line is Prateek Poddar.

Just 2 questions. One is, could you just talk a bit about -- I mean, when it comes to your customer set, how many of your customers have had exposure or have outstanding exposure to some sort of life insurance policies? And sir, secondly, we have seen limited pay and regular pay protection policies within which limited pay is rising. What is this ratio for you? Are you also seeing a trend wherein customers are now opting more for limited pay versus regular pay? Just these 2 questions.

Okay. So on the first point, Prateek, thanks for putting this up and like I tried to touch upon during my address as well, the opportunity of customers who require insurance or who are not adequately insured is huge. It's huge for -- at any level, whether you look at customers at large across population or even customers within the bank. So that opportunity is huge. I mean, in fact, there is a vast universe to be explored as we move along this journey of protection, insuring production. So that is one part that is very clearly an opportunity. The second part limited pay as well as regular pay, I would not want to put across a final judgment that customers are opting for limited pay because, again, a customer in say a metro location would behave totally different as compared to say a customer in a semi-urban or a rural segment. Let's understand. And the reason I'm saying this is, it is not that the premium is differentiated between a regular pay or a limited pay. If a customer is opting for a limited pay, the premium that he's paying for that limited pay is obviously higher, and I'm talking about say per annum outgo is obviously higher as compared to the premium that he would have paid across say of 30 to 35 years. So obviously, the product innovation has helped to address some of the requirements that a customer might have and not wanting to pay for a 30 to 35 years of coverage. But given the fact that there is a corresponding increase in the outflow as well, it might not be same across customer segment and a customer in some area would still prefer a lesser in and outgo across 30 years rather than a much higher premium outgo in, say, 5 to 7 years. So it differs and finally, it is for the customer to decide. But yes, what has helped is definitely the product innovation to ensure that there is a limited pay option as well as against some of the protection plans till around 5 to 7 years back, which required you to pay for the policy term.

So on the first question, just was looking for something specific in the sense, how many of HDFC Bank customers wouldn't have any life insurance at all versus being underinsured because I agree underinsurance is always debatable and it is always there in India, wherein you would have insurance but it would be under, you would be always under insured related to your income or whatever. But just from a case perspective, if at all, are there any customers or is that customers had very small who hasn't had any life insurance products, and I mean savings plus protection both as of now or bad opportunities almost are exhausted as of now?

So again, without highlighting the specifics, Prateek, like I told and I tried to answer that the opportunity is huge. I mean if you're talking about life cycle management, 15 years into it, 4 years into open architecture, that opportunity is still huge.

Next in line is Bhavesh Kanani from ASK. Bhavesh?

Yes. I just wanted to get some sense on how is the persistency aspect included or embedded in the performance appraisal of employees in the banca channel? That is one. And second one was on the number of products a typical customer needs in his life cycle. You mentioned about 5, 6 products are the typical requirement. On that measure, how are we performing for the banca channel? And if you can share for the entity level also, that would be great.

Okay. Thanks, Bhavesh. So on persistency, like I told, without the specifics of what our RM scorecard would look like, there are sales, non-sales quality parameters as well. And across the insurance partner staff and across our staff, there is a very clearly defined process to ensure that any customer, while we try to ensure that a large percentage is paid upfront through standing instructions and likewise, a large percentage wherever a customer has not been able to pay in M1 is reached out to ensure that either he pays up or the reason is documented without going to what percentage is this part of the scorecard, but that is one part. Life cycle management. Interesting that you point out, Bhavesh, because there are 2 opportunities here. One is obviously the existing book with our first partner that has created over the last 15 years. That is one. Second, like I told is an increasing awareness from a customer point of view, which is clearly an opportunity to engage more that is second. And third is the product innovation that we have seen and like someone pointed out a while back. I as a customer might have an existing -- not even going into the other aspect related to retirement planning, milestone planning, I as a customer might have taken a protection plan 5 to 7 years back. Now that segment itself has seen so many product innovation, so many flexibility to the customer that a lot of those customers would want to look at either increasing the protection requirement or looking at the unique products that are coming up. So product innovation across protection is 1 example that I was discussing. But even across, say, savings plan or even across say health plans, right, gives you an opportunity to engage with the customer and let him know that this is what it is. So answering on the specifics, the existing book does help to engage with the customer, a lot of those policies are -- some of those policies are in fact into 10th year, 11th year maturing, and this helps to engage with the customer on that side of this. But even customers or existing customers with product innovation, we do engage with customers on those new products as well. If you're wanting to find out what is our upsell ratio and if I have to put that in a nutshell as to what is our upsell ratio to these customers that would be going to a specific percentage. But yes, we do focus on that side of customer life cycle as well.

[Operator Instructions] Next in line is Mayank from Franklin Templeton. Mayank?

Yes, yes, sorry, sorry, I didn't unmute myself. Just 2 quick questions from me. One is that as a bank, you would also have to take a call on sort of using or sweeting out the customer in terms of either an insurance sale or a fixed deposit or a mutual fund. And so how is that call typically taken? Is there a nudge that is being created that when you don't want a fixed deposit for the bank, you tend to push it more towards insurance, savings? Or are these decisions completely left to the customer? That is one. And second is what portion of our bancassurance business on the insurance side comes through the app, through the HDFC, different apps of HDFC Bank?

Okay. Good that you asked the first question, Mayank. Thanks for that. Now what I want to make it very clear and I did try to touch upon during my address. What I want to make it very clear is there is a very clear defined matrix between, say, a banking and an insurance product. So while there will be a defined grade, there will be supervisory declarations in place, there will be other checks in place, free solicitation as well, right. Very clearly, the customers are informed even as a part of the verification check, and that spans across 12 to 13-odd languages that this product is totally different and not related to any banking product. So very clearly, that is 1 check that is in place for the last 5 to 6 or rather more than 7 years now. That is one. And secondly, when I say that there is a huge opportunity for insurance across space, that does indicate that, yes, obviously, insurance is totally separate as compared to a banking product, even from a seller point of view and even from a customer point of view. That is one. Second, percentage of bancassurance through digital app, I would say across insurance partners, the numbers vary. But at any given point of time, more than 50% would be through our digital mediums.

Next in line, Rohan.

Sir, just wanted to ask you how is the opportunity in the annuity space shaping up because LIC virtually controls the market? Are we seeing customer willingness to consider annuity plans of private sector insurers? And what is your long-term outlook on the annuity space within the life insurance savings space?

Thanks, Rohan. Thanks for putting up this question. The opportunity in annuity is as big as health. Health could be different from annuity in the perspective that, yes, that would probably be the first product that during the life cycle that I spoke about would want to go for either protection or for life or for health. Annuity or retiral products is something that might not be the immediate requirement or at least in -- from a customer awareness point of view. You are right about a lot of product innovation that LIC did in the beginning. But if you look at some of the portfolio, some of the products that even our insurance partners have come up with, particularly over the last 4 to 5 years, you would realize that this has been one big focus item for the insurance partners and for the bank as well. Now this reflects in the product mix because of the product innovation. But at the same time, I do not want to highlight a specific product vis-à-vis competitor, but there are products that our insurance partners have launched, which have been well appreciated by competition, including LIC as well. That is something that has played a huge role over the last 3 to 4 years, particularly. And like I told, this has been a focus over the last few years. The awareness is increasing, and it is, like I say, it's a work in progress. But along with health, annuity or retiral product are big opportunities in the insurance space. And product innovation from our insurance partners is already helping to address that requirement.

Sir, we have a few more questions, but we'll leave it to you. How is your...

We wanted to have a closure at 12. So we'll probably take another 2 and then close it.

Sure, sure, sir. Ravi Mehta from Deep Financial. Ravi? We have another question from Harshit Toshniwal. Harshit, you want to ask?

Sir, just 2 questions. One on the Credit Protect side, how much have we recovered compared to the pre-COVID levels, maybe in the recent months and quarters? And -- yes, that's it.

Nice to know that you know the product name as well. But on that side, which is mostly through the asset business, we would always work on the penetration across the overall base. Now in terms of the penetration that we maintain across the overall base, I think we are pretty much in line from -- with the pre-COVID numbers.

Right. So around 45% to 50% is what company or we generally assume to be pre-COVID numbers. You're saying that penetration rates have been similar to pre-COVID levels?

So again, Harshit, I would not want to highlight a specific penetration rate in that side of the business. But without highlighting or without discussing the specific numbers, like I told, the penetration or the attachment is very similar to pre-COVID.

But sir, this percent will still be down from...

That's not for a question to be put across to a bancassurance person, Harshit. On disbursals, I'm not the right person.

Sir, there is some issue with Ravi's line. So he has just put his question. I'll just read out the question. [Technical Difficulty] Group credit life goods into retail term business?

Sorry, I didn't get the question at all. What kind of target? Hello?

Yes, sir. Yes, sir.

Not audible at all for the last 30 seconds.

Okay, sir. I'll repeat the question. What kind of internal target does banca channel have to convert group credit life goods into retail term business?

There is no target at all. There is no target related to this kind of conversion at all.

I think that's it, sir. I think we have few more, but I think we'll leave it for you to go early. Thank you, sir, for giving us this wonderful opportunity.

Thank you. Thanks, everyone. Thanks, the team at Prabhudas Lilladher and thank you for taking out time. It has been my pleasure.

Thank you, Gunjan, sir. Thank you, HDFC Bank for giving us the opportunity. Thank you, and have a good day ahead.

Thank you.

Thank you.

Thank you.