India's pension market is facing a critical challenge, with penetration standing at a mere 3% of GDP, according to recent industry insights. This situation becomes even more pressing as the country's elderly population is projected to grow 2.5 times by 2050, signaling an urgent need for robust retirement planning strategies.

Shifting Responsibility to Individuals

HDFC Life Insurance CEO Vibha Padalkar has emphasized the growing importance of individual responsibility in retirement planning. The traditional safety net of joint family systems is weakening, as evidenced by the decline in average household size from 4.60 in 2001 to 3.90 in 2018. This shift is placing the onus of retirement planning squarely on individuals.

Challenges in the Unorganised Sector

A significant portion of India's workforce, particularly in the unorganised sector, lacks access to retirement planning products. This gap presents both a challenge and an opportunity for the insurance industry to expand its reach and develop tailored solutions.

Industry Initiatives and Government Support

The insurance industry is taking proactive steps to address these challenges:

• Promoting accessible products like the National Pension System (NPS) and Public Provident Fund (PPF)
• Leveraging digital platforms for easier onboarding of customers
• Redesigning products for younger investors with flexible premium terms and bundled health riders

Supporting these efforts, the government has recently removed GST on individual life insurance policies, aiming to improve affordability and support its 'Insurance for All by 2047' vision.

Affordability of Protection Products

Despite the low pension market penetration, Indian protection products remain relatively affordable. The cost of coverage in India is reportedly 4-6 times lower than in countries like Singapore or the UK for similar protection levels.

Looking Ahead

As India faces the dual challenges of an aging population and inadequate retirement planning, the insurance industry is poised to play a crucial role. The focus on digital innovation, product redesign, and increased accessibility could be key drivers in expanding pension coverage and ensuring financial security for India's growing elderly population.

The urgency of the situation, as highlighted by industry leaders like Vibha Padalkar, calls for concerted efforts from both the public and private sectors to bridge the pension gap and prepare for the demographic shifts ahead.

HDFC Life Insurance Company Limited has announced plans to implement a new GST structure for all individual insurance products starting September 22, 2025. This change follows the Indian government's decision to reduce GST on various insurance products, including term life, ULIPs, endowment, family floater health, and senior citizen plans, as well as related reinsurance.

Key Highlights

• New GST structure to be implemented from September 22, 2025
• Reduction in GST applies to term life, ULIPs, endowment, family floater health, and senior citizen plans
• HDFC Life anticipates gradual increase in demand and improved persistency
• Minimal impact of under 0.5% expected on Embedded Value (EV)
• Company maintains goal to double Value of New Business (VNB) over next 4-4.5 years

Expected Impact on Business and Industry

HDFC Life views this tax reform as a positive structural change that will benefit the entire life insurance sector. The company anticipates several positive outcomes:

1. Gradual increase in demand for insurance products
2. Improved policy persistency
3. Enhancement of Value of New Business (VNB)
4. Boost in sector penetration
5. Support for long-term growth

These expectations align with the industry's vision of achieving "Insurance for All by 2047."

Financial Implications

While the company expects a positive impact on its business, it estimates a minimal effect of under 0.5% on its Embedded Value. HDFC Life remains committed to its goal of doubling its VNB over the next 4 to 4.5 years, viewing this tax reform as supportive of its long-term growth objectives.

Market Response

Despite the positive outlook, HDFC Life's shares closed at ₹754.55 on the National Stock Exchange (NSE), down 2.82%. This market response suggests that investors may be taking a cautious approach as they assess the long-term implications of the tax reform.

As the life insurance industry in India prepares for this significant change, it will be crucial to monitor how companies like HDFC Life adapt their strategies to capitalize on the potential growth opportunities presented by the new GST structure.