In a significant move that underlines its diversification strategy, HDFC ERGO, one of India’s leading general insurers, has decided to cap its reliance on bancassurance at 20 percent. This is in stark contrast to many of its industry peers, who heavily depend on their banking partners for distribution. Instead, HDFC ERGO is placing a stronger emphasis on its agency network, rural outreach, and commercial lines as it looks to sustain and accelerate growth in the coming years.

Why the Shift from Bancassurance?

Bancassurance, which involves tie-ups between banks and insurance companies to sell insurance products through bank branches, has traditionally been a high-yield channel. Many insurers depend heavily on this model due to the ready customer base, wide branch network, and trust associated with banks.

However, Anuj Tyagi, the Managing Director and CEO of HDFC ERGO, made it clear that the company is not looking to increase its banca footprint any further.

"We are not necessarily steering clear of banca tie-ups, but are not planning on expanding it any further to prevent over-dependency,” said Tyagi in an interview with Moneycontrol.

The move reflects a measured, risk-managed approach, where HDFC ERGO seeks long-term stability by not allowing one channel to dominate its sales strategy.

Focus on Agency and Rural Networks

The insurer is instead doubling down on its agency network, which allows for more granular customer interactions and better risk management. This direct-to-customer model gives HDFC ERGO greater control over the sales process and allows it to tailor insurance solutions to niche customer needs, particularly in rural India.

The company is actively expanding its rural footprint, recognising the untapped potential of India's Tier II and Tier III markets. With growing awareness and rising incomes, insurance penetration is increasing in these geographies. HDFC ERGO aims to capture this momentum early on by deploying a robust network of agents on the ground.

Growth Target: Outperforming the Industry in FY26

Tyagi stated that HDFC ERGO aims to grow 2–3 basis points faster than the industry average in FY26. While he did not specify exact figures, he expressed confidence that the motor and retail health segments would lead the recovery.

In FY25, the insurer’s motor insurance portfolio faced pricing pressures, especially in the third-party premium space. However, recovery signs are now visible, and the company is optimistic that the motor segment will regain momentum.

Health, Motor, and Commercial Lines Dominate the Portfolio

As of now, accident and health insurance account for 42 percent of HDFC ERGO’s overall portfolio, making it the largest business vertical.

Other key contributors include:

• Motor insurance: 18–19 percent

• Crop insurance: 18–19 percent

• Commercial lines: 20 percent

The retail business, which includes individual health and motor products, makes up 59 percent of the portfolio, growing at a steady pace of 15–16 percent annually. Tyagi reaffirmed that this segment will remain the core of their business model.

“Retail remains our core. It allows us to be more granular, manage risk better, and directly engage with customers,” Tyagi emphasised.

Group Health Insurance and Crop Segment Outlook

While the retail business continues to grow, group health insurance – covering employer-employee groups and similar collective policies – comprises just 8–9 percent of the book. This segment is expected to remain stable and is not expected to contribute major growth in the near term.

A more uncertain future lies with the crop insurance segment, which is heavily tied to state-level participation in the Pradhan Mantri Fasal Bima Yojana (PMFBY). According to Tyagi, any withdrawal by state governments from this central scheme can directly impact HDFC ERGO's ability to underwrite crop risks.

This uncertainty has led the company to temper expectations from this vertical and focus more on areas within its control, such as retail and commercial lines.

Diversification as the Core Strategy

The insurance company’s long-term roadmap is anchored in the principle of diversification. By limiting its exposure to any one channel or sector and broadening its risk base, HDFC ERGO hopes to create a resilient and adaptable growth model.

This includes:

• Strengthening agency networks with tech-driven solutions

• Investing in rural customer acquisition and servicing infrastructure

• Tapping into mid-size businesses and commercial clients for custom insurance offerings

• Maintaining a lean, focused bancassurance channel without overdependence

This approach ensures that revenue streams are well-distributed, allowing the insurer to weather regulatory changes, economic cycles, or sudden shifts in customer behaviour.

Conclusion

HDFC ERGO’s decision to cap bancassurance reliance at 20 percent is a strategic departure from the norm in the Indian insurance industry. While most general insurers seek scale through bank tie-ups, HDFC ERGO is prioritising depth over breadth, aiming to build sustainable growth engines through direct outreach, rural presence, and commercial lines.

As India’s insurance landscape evolves, companies that diversify their customer acquisition models and build robust on-ground networks are likely to have a competitive edge. HDFC ERGO is clearly positioning itself for such a future.

With a clear focus on retail, controlled exposure to crop risk, and measured channel management, HDFC ERGO appears well-poised to outperform industry benchmarks in the upcoming fiscal years.

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