New business premium of life insurance companies declines 25% in May

As of May, LIC has the largest share in the life insurance market with 67.39 per cent of the pie
For the second consecutive month in 2020-21 (FY21), new business premiums (NBP) of life insurance companies have recorded negative growth owing to Covid-related disruptions.

In May, NBP of life insurers contracted 25.4 per cent to Rs 13,739 crore, from Rs 18,414 crore in the same period a year ago.

In the first two months of FY21, life insurers saw their NBP fall almost 30 per cent to Rs 20,466.76 crore, compared to Rs 28,395.90 crore in 2019-20.

NBP is the premium acquired from new policies for a particular year. Further, the overall sum assured, too, declined 20.2 per cent, from Rs 5.8 trillion till May 2019 to Rs 4.7 trillion till May 2020.

While 23 private life insurers recorded 28 per cent drop in NBP in May, state-owned insurance behemoth — Life Insurance Corporation (LIC) of India — recorded 24 per cent drop in its NBP.

For the most part of April and May, the country was in lockdown and businesses found it difficult to conduct their operations, despite some relaxations from the government.

Private life insurers focused more on digital distribution as the traditional mode of distribution — agency force, bancassurance, etc — was not possible during lockdown.

YES Securities in a note said, “Commensurate surge has been seen in demand for insurance through the online channel.”

Private insurers with their preparedness in the online channel, investments in insurtech, and tie-ups with web aggregators have an upper hand over LIC, the note added.

In the first two months of FY21, NBP of private life insurers plummeted 30.71 per cent to Rs 9,631.27, from Rs 6,673.58 crore in the same period a year ago.

Similarly, LIC’s NBP in the first two months of FY21 dropped 26.49 per cent to Rs 13,793.18 crore, from Rs 18,764.63 crore a year ago.

The top private life players — ICICI Prudential, SBI Life, HDFC Life, Bajaj Life Insurance, and Max Life — reported drop in their NBP numbers for May.

While ICICI Prudential’s NBP dropped 2.3 per cent in May, SBI Life recorded a 31.3 per cent drop, HDFC Life’s NBP plummeted almost 47 per cent, Bajaj Life’s NBP also contracted 46 per cent, and Max Life’s numbers dropped 18 per cent.

Only a few private insurers — Canara HSBC OBC Life Insurance, TATA AIA Life Insurance — recorded positive growth in NBP in the month of May.

“The current numbers are a reflection of the impact Covid-19 has had on the life insurance industry. Customer sentiment is more here and now, keeping liquidity close to them and spending on immediate needs. Hence, de-growth this month will be like this for a few more months to come. Having said that, there has been rise in the sale of protection plans on account of increasing awareness among customers on protecting their risks. We will have to wait it out till the year-end to see how sentiments change and their impact on our industry,” said Tarun Chugh, managing director and chief executive officer, Bajaj Allianz Life.

“The decline in first-year premium growth for private companies has been more pronounced as they had reported an increase of 46.9 per cent for the two months till May 2019, compared to a drop of 30.7 per cent till May 2020,” CARE Ratings said in a note.

As of May, LIC has the largest share in the life insurance market with 67.39 per cent of the pie. The 23 private life insurers make up for 32.61 per cent of the life insurance market.

“Even as the strict lockdown has been lifted in June, the life insurance business could actually witness a fall in the first quarter of FY21, while growth could potentially return in the second or third quarter for FY21. Companies, which have undertaken investments to build a robust digital platform, could witness faster growth, compared to those who have lagged in building an online channel,” said CARE Ratings in its note.

Life companies have also witnessed a drop in their total annualised premium equivalent (APE) by 23 per cent in May, and individual APE plummeted 32 per cent.

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