Spend-IT: HDFC Life's tech spending outpaces its revenue growth

HDFC Life Insurance, India's second-largest private life insurer, has witnessed a notable increase in its technology expenditures, paralleling its revenue growth in the last few years. Following the pandemic, both revenue and technology investments have risen at a comparable rate. Over the past three fiscal years, including FY24, the growth rate of its technology spending has even outpaced that of its revenue.

As per an analysis by TechCircle, HDFC's revenue experienced a decline in the last fiscal year, despite a 9% increase; however, its technology expenditures surged by 15%. Historically, the company has allocated approximately one-fifth of its revenue to technology, on average, since FY20. Consequently, the technology spending for the reviewed year remains below the average threshold.

The organisation believes that Artificial Intelligence (AI) and data analytics are significantly enhancing various areas including risk assessment, optimising underwriting processes, and improving fraud detection capabilities. In an interview with TechCircle in December, Ayan De, Head of Enterprise Technology, at HDFC Life mentioned that these advanced technologies are expected to facilitate secure and transparent policy issuance and claims processing, with a key focus on distribution.

The insurance giant reported that approximately 2.56 crore queries were addressed by automated bots in the previous fiscal year. According to its FY24 annual report, HDFC has integrated generative AI into its business operations, enabling comprehensive document analysis, secure APIs, and specialised tools such as the Customer Interaction Summarizer, Report Analyzer, and Pitch Generator.

In the last fiscal year, HDFC restructured its technology team into two distinct groups: one dedicated to business benefits and the other focused on core technology development. The company has also implemented a system to manage cloud technology usage, enhancing security measures and ensuring compliance with data protection regulations.

The insurer is also in the process of modernising its data systems to enhance flexibility and provide real-time, accurate information. The adoption of micro-services and LoCo technology aims to minimise redundancy and accelerate operational efficiency.

The organisation has further utilised serverless technology for code execution without server management and employs API gateways to create a flexible operational framework. This fiscal year's goal is to exceed 600 touch points by strategically expanding branches, attracting top-performing distributors, and investing in technological advancements. The Direct channel focuses on boosting sales through upselling and cross-selling to existing customers via an online platform that streamlines the onboarding to policy issuance process.

The company also said that the key third-party administrators (TPAs) have been integrated for real-time access to medical documents, facilitating faster policy issuance. An underwriting process has been established to identify and filter out potential fraud.

The company’s InstaCheck initiative aids the sales team in presenting eligible coverage options during quoting. Additionally, an automated maturity payout system ensures timely and convenient payouts through digital channels at every touch point. The company also uses WhatsApp as the preferred method for customers and sales teams to collect policy onboarding documents, enabling swift documentation completion.

According to a report published by research and advisory firm Gartner in January 2024, IT spending in India is estimated to record double-digit growth of 11% in 2024, totalling $138.6 billion up from $124.7 billion last year. During the year, worldwide IT spending is expected to total $5 trillion in 2024, an increase of 6.8% from 2023.