 So, welcome to our series, the ongoing series on non-meters leading the economic resurgence, which is presented by E4M in association with Danik Bhaskar Group. In this series, we reach out to sectoral leaders to get their insights on how non-meters are emerging as drivers of growth. And today we have with us Mr. Pankaj Gupta, Senior EVP Sales and CMO HDFC Life, who is going to share with us how the category is operating, how the category is functioning in non-meters. He is going to share some insights on it. Welcome Mr. Gupta to this one-on-one discussion. Thank you Rohan, it's a pleasure. My first question to you Mr. Gupta is that there are a lot of, we have seen a lot of behavioral changes over the last six months since the lockdown was there and then it was lifted. So, I want to understand from you that what are some of the key insights as far as consumer behavior changes are concerned that have taken place in your category that has come up of the lockdown, especially in the non-meters? Well, it's a very interesting question given that almost all of us as well as all the industries have been impacted severely by this pandemic. However, different industries have seen their consumers behavior evolve in different directions. From the life insurance industry perspective, I would say that our product helps the customers in managing the risk in their lives. And the product is a safe haven for people who are facing uncertainty in other dimensions of their lives. From that perspective, what we have seen is that even in these tough times, the life insurance industry has seen that consumers have still maintained their relationship with the product and the category. So, if you had to talk about some numbers and trends, if you look at many industries, they had degrowth of 50% or 80% or 60% in this part of one. Life insurance industry had just about a mid-teen to late-teen type of a degrowth, which is about 15-17% type of a degrowth. And that I would say goes to show the continued relevance of this product in managing the risk prevailing all around us. So that is one clear consumer trend that we have seen, that consumer is worried about the future. And when they're worried about the future, they would want to have a flight to safety in every way and life insurance is one category that helps them in that. Another big trend that we can really make out is that consumers comfort with the digital channels. So, for example, if I have to talk about the percentage contribution, percentage contribution of the digital channel in our own sales process has gone up from something like 5% to more than 10% in the quarter one of this year versus last year. And the interesting thing from the perspective of this discussion about the non-metros is that a lot of that growth is coming from non-metros. So while we have a feeling in our minds that digital customer is largely in Mumbai and Bangalore and Delhi, we have seen a lot of those customers coming to us from non-metros as well. So these two clear trends about the continued relevance of risk mitigating products and secondly, the digital comfort that most of the customers have today in dealing with their providers. Right. You know, we have also seen that HTFC Life has tailored and segmented its products for non-metros and metro markets. So tell me, what are the parameters that differentiate your offerings for non-metro markets? So we have a very integrated thought process when we look at any customer or consumer segment, when you look at the non-metro customers, there may be a couple of stereotypes as well as a couple of real differences. One of the things that we have to be aware of is that the lower down we go in the population segment that we're talking about, the need for lower ticket size products will be higher and higher. So one of the innovations we have done is that when we are going to the markets, which are non-metros, we have a strategy on product side where the lower ticket sizes are viable and relevant and useful to the customers. Another relevance that we have created in the consumer mind is that if our product is targeted to the rural segment, now some of the rural population have huge farm dependence. So if the crops fail, their incomes fail. So we have products that offer premium holidays for up to one or two years. So then even if the crops have failed, the policy continues and there is no loss of coverage for those customers. The third change that we have to look at is the increased relevance of regional languages. So what we have done is whenever we have come out with our regional marketing strategies, we have researched in a formal manner about what type of languages that customers are preferring in those markets and that customer preference very interestingly in our observation might be different for an outbound communication versus an inbound communication. It might be different for a written communication versus an oral communication. It might be different for a formal policy document versus a customer service engagement. So based upon the consumer preferences for the language that they want to be dealt with in, we have modified our own channel and approach strategy accordingly. And all of the collaterals that we have enabling our sales team to engage with the customers in those regional languages has been a formal attempt that we did as part of a strategic project that we undertook across the organization last year. Right. So if we observed, HDFC life has also placed a lot of emphasis on collaborations with players on the ground level. Tell me, how has the move helped engage with consumers in the smaller cities and towns? Well, it's a very interesting question you have raised and I would give you the perspective of why it is so critical to work with partners in the life insurance industry. Now our country has probably five lakhs to six lakhs of villages. And probably 5000 to 6000 of towns and cities of relevance to the, to most of the producers and service providers. Our own industry, life insurance industry, has an engagement with a customer probably once twice thrice in their lifetime. We are not a product that the customer engages with three times in a month or five times in a month, the way they might interact with their banking account or with a credit card account or even with their telecom provider. So for us, the importance of working with partners who have the distribution strength in the entire country and even in the smaller markets is very high. From that perspective, what we have done is we have taken a conscious strategy of signing up those partners who are strong in their own markets regionally. So a couple of years ago, Reserve Bank of India came out with small finance banks. And today, we were working with a major component of those small finance banks who have strengths in their local markets as well as in other markets. And with those partnerships, we are able to reach out to a totally new customer segment and in a very cost effective manner, in a manner which these small finance banks have learned over a period of time. And the ability of our product to reach out to those customers who were so far under service has become much, much better with that. Similarly, we have a lot of deep engagements with micro-finance institutions, with non-banking finance companies, with payments banks, et cetera, who also have the ability to reach out to the last mile in their own unique ways, in their own unique markets. You know, this pandemic has also led to a focused interest on health. And I think it's going to stay here, of course, for the next time, the next six months or one year, whatever. Tell me, how has this translated in sales? And how do you assess the consumer sentiment? So when you look at the overarching concept, overarching concept with that of protection, how can a customer protect their family? If something were to happen to them, then the role is played by lack insurers. Another thing in the customer's mind is what happens if there is a health situation, whether due to the pandemic or because of any other reasons which could be disruptive of their livelihood, as well as income and expenses. They have the role of health insurance comes. Now, in India, there is a typical dispensation where health insurance products are provided by all types of insurance players. So general insurance companies stand alone, health insurance companies, as well as life insurance companies have different ability to provide different types of solutions in the health space. We also have the ability as an industry to collaborate across partners. So for example, we have a collaborative product with the SDHC Argo, which offers health plus thumb cover. So what we have seen is these types of protection products, which protect the customer on the health side as well as life side, the acceptance of those products has risen dramatically in these times. Having said that, I would also want to put here is that there is one side which is the need side or the perceived requirement of a product. And the other side is acting on that and acting on a need would be a function of how critical it is perceived to be and what is the wallet that the customer has and where they want to put the portion of that wallet on what type of consumption pattern they want to put in that wallet. So I would say this is an evolving situation still, while the need has gone up for protection of both life and health type of products, we still have to watch carefully how it can be a long term sustained momentum rather than something driven only by the pattern. There are also a lot of data and reports that indicate that non metro markets are growing very rapidly higher than the metro markets. So tell me how are you seeing the demand in non metros vis-a-vis metro markets? So I would agree with the overall observation that the non metro markets have the potential to offer higher growth. And there are a couple of reasons for that. If you see the way the markets and most of the newer industries have evolved, the first attempt is to service the metro markets. Now there comes a point of time when the metro markets get relatively fully serviced and relatively saturated. Now while life insurance is nowhere near saturation in our country, the fact remains that the smaller markets are even more underserved. So the potential for growth in the smaller markets because of the reason they have been underserved and because of the reason they are as relatively lesser saturation is higher. Now secondly, if you look at the current context, which is the pandemic context, what we are observing right now is that because of the good luck of having good rains this year because of the good monsoons, the rural incomes and the smaller cities have seen relatively better economic indicators than the metros. So metro had a huge impact because of the immediate lockdown that we had and the reverse migration that we saw of many, many people leaving the metros. When we look at certain surveys and studies also, we saw the extent of disruption that happened because of the pandemic was more in the metros versus the non metros. So all of these factors, the income side, the relative under saturation, the immediate context of the pandemic, all of these indicate that the potential for sales in the future is largely coming from the non metro markets. Metro markets will remain critical. They are even now, I would say more than about 50% of the sales that we have. However, going forward, the growth rate that we are expecting in the non metro markets could be higher. Now there are a couple of implications of that. Within life insurance, certain channels are channels where as I mentioned earlier, we have the dependency on our partners like the small finance banks and the other banking partners we have. However, there are other channels like agency channel or even our online channel where we have a greater degree of control over how we expand and how we grow. Now in those types of channels, we have seen that the contribution from non metro markets has grown even faster. So agency business and online as I mentioned earlier also, they have shown good trend. What it indicates to me is that the potential and the opportunity is there. How we reach out to that customer is up to us. And there when I see how we take our strategy forward, I like to think of it as an integrated strategy. And when I say it as an integrated strategy, what I mean is we have to have the right products for those markets. We have to have the right sales model for those markets. We have to have the servicing model so that the customers in those markets are comfortable dealing with their brand. We have to have the right claims management model. We have to have the right language strategy. And when all of these things come together, we will see much higher future growth from the peer to markets. Right. Mr. Bhukta, tell me from an HDFC like perspective, how important are non metros in your market mix and also what percentage of your sales is from the non metro sector? And do you see this share increasing as we move on? So non metro I would say typically would be about I if I had to give an approximate number about 40 to 50% of the market. And yes, as we go forward, I would expect that the contribution from these non metro markets will keep increasing. Now, when we look at life insurance industry, couple of numbers are very, very stark. For example, insurance density in our country, the life insurance that density is just about $55 per person per year. When you look at insurance penetration as a percentage of GDP, it's just hovering around 3 3.5 percentage points. These are very, very low numbers. In the future, if the growth has to come, and we also keep going as an economy, the numbers do indicate that the criticality of the non metro markets, the peer to markets will will be extremely critical in the success of the players in this industry. Right. See if we look at the current market climate, the way markets are, and if you have to look ahead, given this context, you know, where do you see the growth coming from? Also looking at the expansion plans of HDFC life, how important are non metro markets going to be in this current climate? So now if you look at this segmented approach, one of the geography that we're talking about metro and non metro, then we look at the life insurance industry itself. What is the role of the life insurance industry in the customer's life? If you have to broadly classify that, we are giving protection against mortality, where if somebody were to lose their life, the family is protected. We are also having the ability to give protection against morbidity. If there is a health situation, how is that dealt with? And then we also have longevity solutions, where given that life spans are increasing, and the retirement period of the life is going up higher and higher. How do you plan for an extended period of retirement? So earlier if somebody were to retire at 55 and the life expectancy was 65, the retirement period was probably 10 years. So you plan for a retirement life of 10 years. Now if the life expectation is going to go up and keep going up and retirement is about 55, 60 or a couple of years more, you might be looking at the scenario where some people have a retirement life of 15, 20, 25 and even more number of years. From that context, the importance of retirement solutions also goes up. Again, coming to the morbidity side, which is the health side, a very, very important trend we would see is that for many of the lifestyle diseases, which are prevailing now, diseases like diabetes or health, the risk of mortality may not be very high, but the morbidity will continue. So people live with their conditions for a long period of time. From that perspective also planning for a situation where you live with that type of a risk in your life is very, very important. Again, on the mortality side, traditionally in India, there has been some type of a joint family system. So if somebody who is a breadwinner, something were to happen to him and it is a joint family, there is some type of a social support that is there. Now that tendency is reducing. The trend of nuclear families is going up. And many of these trends are, all these three trends are relevant for the non-metro markets also. So even in the non-metro markets, there are lifestyle diseases. Even in the non-metro markets, people are going to have a long retirement period. Even in the non-metro markets, people are going to have more and more nuclear families. And in that scenario, the role of life insurance for the tier two markets will keep enhancing. So one side is the relative segmentation between metro and non-metro. But when you look at the customer as a person and what their needs are, the relevance of all three of these solutions for the non-metro customers is also increasing because of the sociatal and demographic behavior that we are seeing all around. So my last two questions, one is that, do you see the spike that is there in the market right now lasting for a certain period of time or will it become part of the consumer behavior for a longer time? I would say, well, it is a billion dollar question. We are asking consumer behavior is not easy to predict. And right now, because of the pandemic, it is a salient question in everybody's mind about how to mitigate risk, how to manage the health fears that people have in their mind. Having said that, I believe there has been a very sort of very critical awareness about the need for life insurance in everybody's mind. While customer memory may be short, the reason this pandemic has impacted many of us within our plans, and that it is an extended situation. It's not like happening for one week or two weeks and then going away. It has happened for six months already in India. My feeling is many of these trends will likely sustain the importance of health management, importance of life insurance solutions will sustain in people's minds. And we would see that the low penetration percentages, the low insurance density in our country will get some type of a positive momentum going forward. Having said that, we have to all keep watching it our role as market years, as business people to make sure that our products are relevant to the consumer. We are communicating about the benefits of product in a manner that is relevant and that is understandable by the consumer remains very, very high. Life insurance as a category is sometimes difficult to understand by the consumers. And it is the responsibility that we have as an industry also to make sure that in the future we communicate our benefits much, much better. Right. My final question is that what are the challenges and opportunities that lie ahead for the insurance sector? Also, what does the year look like for your category? So I would say there are a couple of challenges that we can clearly see right now. The most critical challenge is seeing a GDP contraction right now. If you look at quarter one results, Indian GDP contracted by something like 23%, which is a very big dip in GDP. And GDP dip means that incomes have declined for many of the people. That is one thing we have to remember. Then the unemployment rates shot up dramatically in April, May, June. Since the time unemployment rates have come back, there has been a little bit of an improvement. But the incomes have still not kept pace. Incomes are still impacted for many of the people. Third factor is the fear factor. When I say fear, it is also about confidence in the future. How fast that comes back so that people have the willingness to spend money, not just to keep their money for a future which is looking uncertain. So we are in the middle of each one of these trends that we have to watch out for. On the positive side, the digital adoption has been a true success in this entire pandemic. People have worked in spite of the glitches that we have seen in today's conversation. Digital has largely held up and we have been able to work, we have been able to be entertained, we have been able to be socially connected in spite of the pandemic. So digital digitization that we have seen right now, digital adoption that we have seen right now will have long term positive consequences in the way services and products are delivered to the customer. So the rest of the year would be a mix of how these various factors play out. As I said in the life insurance industry, we have already started seeing a little bit of growth coming back. If I remember the numbers correctly, July we grew as a company by about 12% on a very high base of growth that we had last year. So the numbers have already started becoming positive for the life insurance industry. If the trend continues for the year as a whole, we should be fine. That's how it is looking like for the entire industry and for us as well. Great. Thank you, Mr. Gupta for your time and speaking to us and sharing your insights. It has been a great discussion. It's been a pleasure. Thank you very much. Bye bye. Thanks.