Rising awareness about life insurance, new product launches and a supportive industry dynamics for distributors are helping the sector fare better. Higher distribution commissions paid by life insurance companies
(vis-à-vis mutual fund distributors) is giving them an edge.
The trend of strong business growth is expected continue even in the final quarter of FY20. According to Neeraj Toshniwal, analyst at Emkay Research, “March quarter is a seasonally strong quarter, accounting for 35 per cent annual policy volumes.” Even on a medium to long term basis, new product launches, push towards protection products and scaling up of non-par savings business like annuities should lead to strong APE growth, he adds.
Apart from rising awareness about life insurance as a protection product rather than a savings asset, the good solvency position of listed players should lead to faster growth in high-margin protection products such as term policies. Even in December 2019 quarter, the listed players are likely to see up to 410 basis point year-on-year expansion in VNB (value of new business) margin, as per Emkay Research.
On the whole, life insurers offer good investment option for investors. However, awaiting for some correction to enter these stocks is advisable given the rally in recent months.