Either doing away with or significantly reducing the interest that people get when they lapse their policies would help because people need to be told that it is not in their interest to lapse their policies and very clearly give the message that these are long-term products, says Vibha Padalkar, MD & CEO, HDFC Life Insurance. What has contributed to the overall improvement in the market share in the embedded value?We have always believed in a balanced distribution mix as well as tech-led solutioning and both have come in extremely handy in the backdrop of the pandemic. In the first quarter, everything was shut except a few branches here and there. That solutioning enabled us to reach out to our prospective customers. Also bank branches were open and our people were also there and were able to connect with customers virtually. In the first and second quarters, our bancassurance and digital modes did very well. A noticeable shift has been that towards Q3, our agency channel also started picking up speed and learnt to sell products without face-to-face communication. Coupled with the fact that we had products that people wanted to buy, especially products that were perceived to be less of a risk. People also started allocating higher ticket sizes to these. It is a combination that came together and helped us increase our market share by over 200 bps. While a lot of parameters have done well, what led to the decline in the nine-month VNB (value of new business) margins to about 25.6% from the earlier 26.6%?It also led to this 0.1% growth and value of the new businesses?The aberration was there last year. The trajectory of our margins were fairly high in the first quarter because we had launched Sanchay Plus, our blockbuster product, and that did exceptionally well. But over the quarters we have brought Sanchay Plus from being almost 60% of our business down to about 30% of our business and even lower. So, quarter one, two and three trended downwards. This year it is actually trending upwards. If you were to look at our own margins you will find that kind of upward trajectory in standalone Q3. In standalone Q3, the VNB margin was 26.4% while last year Q3, it was 24.7%. So, it is almost like an inflection point that is happening and because of that inflection point, we are cautiously optimistic that we should exceed full year margins of 25.9% that we put out last year. As for the value of the new business growth, the reason for that inflection is the VNB being flat and almost identical this nine months versus the last nine months. But the standalone VNB for Q3 shows almost a 27% growth — from Rs 450 crore, it went up to Rs 570 crore. The acceleration in VNB margins will be seen in Q4 as well. What has led to this 20% growth year on year in the embedded value at Rs 25,000 crore plus and what is the outlook ahead?It is a combination of a couple of things. There is a new business margin that we talked about. The addition of over Rs 1,000 crore helped in terms of accretion to embedded value. There is also a back book unwinding and this time we were helped by the market. Embedded value operating profit grew from 18.1% last year to 18.3% this year. We are satisfied with it against a fairly difficult macro environment. The protection business growth has also been healthy. How do you see the share of the protection business and the overall product mix over the next year?We saw 17% growth in protection and the other end of the spectrum of protection is annuity, which is longevity protection. There we saw a 42% growth. Again, fairly happy with the levels of growth and the number of policies that are trending upwards. Given the fairly low levels of protection as well as coverage for senior citizens — we expect to see robust growth at both ends of the spectrum. A 20% plus growth year on year should be very doable. We have seen an improvement in persistency ratio. We have seen a lower expense ratio as well. Are these trends sustainable?I would continue to see an upward trend in our persistency. There is a noticeable change in the 13th-month persistency. The 61st-month persistency is a little bit more difficult, little bit sticker because it is something that we sold almost five years ago. So, undoing that and finding those customers who did not pay their premiums and then explaining to them continues to be a challenge. We try to do it but it continues to be a challenge and that is why you will see the 13th-month persistency getting better and 61st-month persistency taking a little bit longer. What would help is if there could be some barriers to exit in the unit-linked space. Also either doing away or significantly reducing the interest that people get when they lapse their policies would help because we need to tell people that it is not in their interest to lapse their policies and very clearly give the message that these are long-term products. As a company we do it but the construct of the product could help. But yes, we are very aligned that the persistency has to trend up because a customer who is not persistent is going to lose money, is going to be aggrieved and the company also does not make money. So it is a lose-lose proposition and the focus on getting the persistency numbers up will continue.