Premium growth of life insurers hits 4-year low; LIC's collections drop

The growth in the first-year business premiums — the premium collected from new individual and group policies sold in the given period — of the life insurance sector seems to have taken a knock in the first eight months of FY19. 

According to the data from the Insurance Regulatory and Development Authority of India (Irdai), the growth rate between April and November has been 0.33 per cent - the lowest in four years. 

This has been due to the fall in the first-year business premiums of the Life Insurance Corporation of India (LIC) at -7.93 per cent. For the private sector, this has risen 23.22 per cent. 

However, even individual premiums have come down in November. If seen from an individual annualised premium equivalent (APE) perspective, which pertains to the data of individuals, things have been slowing for the private sector, too, experts suggest. 

APE is estimated by taking the value of regular premiums, plus 10 per cent of any new single premiums written for the period.

In November, the large private sector players have reported a significant drop in their APE growth numbers compared to double-digit growth in the last three months. LIC reported a 12 per cent decline in its APE for November, whereas private life insurers' combined APE declined by declined by 1 per cent in November.

Insurers said the volatility in the market is the prime reason for this slowdown. Ashish Vohra, executive director & chief executive officer, Reliance Nippon Life Insurance said, “Our experience has shown customers tend to postpone their purchase decision, especially, when it comes to long-term financial commitments, when the markets are volatile. This is one of the reasons for the lukewarm industry performance in November.”
Another important reason is the conscious effort on by players to change their product portfolio more in favour of protection products vis-à-vis market-linked products. 

Parthiv Majumdar, head, insurance, Bankbazar, feels in the previous 10-18 months, there has been a huge drive by major companies such ICICI Pru, HDFC Life for protection business, which was followed by others as well.

Insurance experts say this is because of two reasons - one, many savvy policy buyers simply want life cover, and do not go for market-linked plans. Also, with the rise in online-term plans, many simply want to 'click and buy'. Also, insurers find protection plans more profitable. 

Aalok Bhan, director and chief distribution officer, Max Life Insurance said, “The life insurance industry is seeing a focus on protection plans, driven by a number of social, cultural, demographic, economic and regulatory factors. Protection is the primary purpose of life insurance, and this is a good trend for a country that has, traditionally, been under-protected.”

Bhan added: “While it's too early to read the slowdown, the drop in new-business premium in November has been skewed by the performance of large players. If you remove their performance figures from the calculations, you will see the picture changes.”

According to a report by Kotak Institutional Equities, HDFC Life reported a 20 per cent year-on-year (y-o-y) decline in November in individual APE after a strong 37 per cent growth in October. Similarly, ICICI Prudential Life’s retail weighted premium was down 24 per cent (y-o-y) for the month, after it posted a 17 per cent decline in October. “ICICI Life has worked on monthly paying policies, which is one of the reasons for weak growth”, the report noted.

Insurance experts feel the reason for LIC’s decline during this year has been due to its agency-driven model. 



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