We will try and keep VNB margin in 24% range by this fiscal-end: HDFC Life Executive Director Niraj Shah
2 min readPrivate sector insurer HDFC Life Insurance has successfully reduced the impact of GST changes on its Value of New Business (VNB) during Q3 and aims to further mitigate this effect in the fourth quarter, according to Niraj Shah, Executive Director & Chief Financial Officer. The company introduced a clawback mechanism to adjust commission structures for ULIP plans across major distribution channels. Excerpts from the discussion:
What factors drove HDFC Life’s 8.77% YoY growth in net premium income to ₹18,242.39 crore during Q3FY26?
Quarterly growth was propelled by a 13% increase in individual APE (Annualized Premium Equivalent), building on consistent performance with 11% growth over nine months (17% two-year CAGR). Credit life group business expanded 25% year-on-year. Within individual segments, protection premiums surged 70% quarterly (+42% over nine months), while individual savings/commercial business grew 55% in Q3.
Did GST exemption significantly boost protection segment growth?
While the protection business was already growing at 27% pre-GST changes, the exemption accelerated this momentum. The sector benefits from increased affordability, though the impact is most immediately visible in protection products due to their straightforward pricing structure.
Which other products benefited from GST reductions?
The primary beneficiary remains protection products where cost reductions are most transparent to customers. ULIP products also show improved economics from lower charges, though this isn’t exclusively attributable to GST revisions. Other product categories may see gradual benefits as customers recognize revised pricing advantages.
How will GST impact affect VNB margin trajectory this fiscal year?
Q3 VNB growth moderated to 3% due to GST revisions, though underlying growth stood at 13%. The GST impact has narrowed from 300 bps initially to 190 bps, with expectations of further reduction in Q4. Full-year margins should stabilize around 24%, slightly below pre-GST levels but significantly recovered from the initial impact.
How have commission structure adjustments progressed post ITC restriction on commissions?
The company implemented selective commission realignments through clawback clauses for ULIP products with key distributors. Unlike upfront commission reductions, this mechanism links payouts to policy persistency – maintaining initial commissions while reclaiming portions if renewal premiums lapse. Most distributor negotiations are complete, with implementation focused on improving long-term persistency metrics.
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