HDFC Life CFO: Open to inorganic opportunities to boost growth

As HDFC Life enters its 25th year, the insurer is prioritising sustainable scale over short-term profitability, as per Niraj Shah, ED & CFO of HDFC Life. 

While India’s insurance regulator accelerates reforms from relaxing capital norms to proposing composite licences (that could allow insurers to offer both life and non-life products), the industry is bracing for a wave of innovation and potential consolidation. Shah, in an email interaction with FE CFO shared that the company sees headroom for organic growth, and remains open to inorganic opportunities if regulatory changes expand business lines or trigger M&A activity. 

“Composite licences may also result in expanding business lines for insurers and potentially trigger some M&A activity. We remain open to inorganic opportunities to complement our organic growth,” notes Shah.

He also emphasised that insurers with strong risk frameworks, diversified models, and balanced product portfolios will be best placed to thrive as IRDAI pushes faster product approvals, lowers solvency requirements, and transitions to a risk-based capital regime.

Read more in the edited excerpts as Shah outlines why the company is prepared to sacrifice margin expansion in FY26 to doubling their reach through AI, automation and advanced technology and expansion into Tier 2–3 markets.

Do you see smaller towns contributing 50% of new business premium within the next five years? What’s the profitability playbook for these markets?

With Tier 2 and 3 markets already contributing nearly two-thirds of new business premium today, we see these geographies as key engines of growth over the next decade. We are focused on ensuring product-market fit and continuous improvement in quality to manage overall portfolio profitability. 

Our predictive persistency model identifies at-risk policies early, enabling timely engagement with customers and offering tailored solutions to improve retention. In addition, we deploy predictive models to detect patterns linked to elevated risk by policy type, intermediary, or region. This proactive risk management approach improves our claims experience, mitigates fraud, and ensures fair and timely claim settlement for genuine policyholders — protecting margins while strengthening customer trust.

In FY25, Individual APE (Annual Premium Equivalent) was 18%; Value of New Business (VNB) rose 13%, with VNB margin at 26.5%. What are your FY25-26 expectations for VNB margin, AUM growth, and market share and what will be your biggest driver?

As we enter our 25th year of existence, our aspiration remains, against a backdrop of a stable regulatory regime, to consistently outpace industry growth and sustain our position amongst the top three life insurers in India. We have consistently delivered positive, range-bound operating variances over the past nine years (excluding the COVID period), reflecting prudent risk management and disciplined execution. Over this period, we have doubled key performance metrics over multiple blocks of 4 to 4.5 years, and we remain committed to sustaining this growth trajectory.

FY26 has commenced on a steady note, even as the broader global environment remains uncertain, shaped by trade frictions, geopolitical tensions and divergent growth trajectories across markets. While the external environment remains dynamic, our fundamentals have held strong; anchored in a balanced product mix, a diversified distribution footprint and a consistent focus on innovation.

We aspire to grow faster than the industry. While the evolving product mix may be margin-accretive, we remain focused on investing in distribution and technology to strengthen long-term capabilities. This strategic choice may result in margins remaining range-bound in the short-term, but position us well for sustainable, quality growth over extended periods of time.

Also Read: Why Colgate-Palmolive CFO Sees Room for Growth Despite Toothpaste Saturation

With digital-first insurers entering aggressively, what’s the biggest threat to HDFC Life’s market share in the next three years, and how are you defending your lead?

At HDFC Life, we are focused on leveraging technology to improve customer experience and enhance our ability to manage risk in a rapidly evolving environment of changing customer expectations and emerging threats. Our scale, brand, multi-channel distribution network and digital capability enable us to serve our customers and build a sustainable business. Project INSPIRE, as indicated above, is a significant tech transformation journey aimed at building a next-generation enterprise and data architecture. This initiative will enhance our go-to-market capabilities and further elevate the overall customer experience.

We are embedding AI, automation, and advanced analytics into every stage of the customer journey—from personalised onboarding to underwriting, servicing and claims. At the same time, we are doubling down on our reach. Our 200+ new branches in the last two years, strengthened agency network, and deep partnerships enable us to serve metros as well as Tier 2 and 3 markets.

We believe that the faith of our customers in our brand, our reach, execution speed and digital capability would enable us to address ever-evolving customer expectations and further strengthen our market position.

Also Read: Nuvoco Vistas focuses on operationalising Vadraj Cement with Rs 1,800 cr investment

Is HDFC Life exploring acquisitions or merger with insuretech startups or smaller insurers to accelerate scale, and how much capital is earmarked for inorganic growth?

HDFC Life successfully executed the industry’s first M&A transaction with the acquisition of Exide Life (in 2022), completed in less than 14 months. The acquisition has been value-accretive, driving the share of the agency channel from 14% to 18% and enhancing our presence in Tier 2 and 3 markets.

We believe that there is significant organic growth potential in the life insurance sector. IRDAI has relaxed minimum capital requirements for new players and the government is in the process of further relaxing FDI limits. These initiatives will enable different business models and foster innovation. Composite licences (this would allow insurers to offer both life and non-life insurance products under one entity) may also result in expanding business lines for insurers and potentially trigger some M&A activity. We remain open to inorganic opportunities to complement our organic growth.

With IRDAI pushing for faster product approvals and lowering solvency requirements, do you see any hidden risks for the sector’s stability or profitability?

IRDAI has introduced multiple measures over the last few years with the objectives of increasing insurance penetration, protecting customer interest and enhancing ease of doing business. Product regulations such as Use and File, introduction of Variable Annuity products, have enabled faster speed to market and innovation. The shift to a Risk-Based Capital (RBC) framework will align capital requirements more closely with the inherent risks on insurers’ balance sheets --  supporting growth and capital efficiency.

We believe that insurers with a robust risk management framework, a well-balanced product mix, and a diversified distribution model will be able to address the vast market opportunity in a sustainable manner.