Double-digit surge in insurance sector by FY21-end: LIC MD Raj Kumar

The life insurance industry, which saw a huge slump in business in the first quarter of the current financial year due to the virus-induced lockdown, returned to growth path by posting strong numbers in Q2. 

With the worst behind, the life insurance sector is expected to get back to double-digit growth by the end of this fiscal year (FY21), said Raj Kumar, managing director (MD), Life Insurance Corporation (LIC).

Growth of the industry had fallen by 19 per cent in April. But it revived, and by August end, the insurance industry has shown positive growth of 2.4 per cent compared to the same period last year.  While life insurers clocked a positive growth rate of 2 per cent, non-life insurers saw 3.6 per cent growth.

As far as LIC is concerned, by September-end, it has seen a 23.55 per cent growth in first year renewal premium income and 4.71 per cent growth in first year premium income over the last year. 

Growth in composite first year premium, underwritten by the life insurance industry in September, is 26.47 per cent while for LIC it is 30.12 per cent. LIC has seen growth of 12 per cent in renewal premium during this period.

“The economy is on a recovery path and the upcoming festive season should add to the momentum, although the sustained spread of Covid-19 virus poses a downside risk to short-term and medium-term growth rates,” Kumar said. 

Due to the pandemic, experts have said there is a pick-up in demand for term products.  Acknowledging the notion, Kumar said, “We are seeing a surge in interest for pure insurance or term assurance and annuity products among the insurable population.” The corporation has seen growing interest for its online term products, and expects to sell around 40,000 policies in FY21.

The Insurance Regulatory and Develo­pment Authority of India (IRDAI) is looking to bring in a standard term product to increase the protection quotient in the country that all life companies have to offer. This step by the regulator, according to Kumar, is aimed at bringing some uniformity to the term products offered by insurers.  “While it will definitely help the customer to compare term products of different insurers, effectiveness in driving demand for the term products will ultimately depend on whether the standard term product fits into the prospects’ insurance needs,” he said.

Aided by a fall in interest rates, the participating policies have become popular among customers and Kumar predicts an uptick in demand for guaranteed annuity products and participating policies, going ahead.

While health claims due to coronavirus are seeing a rapid increase, life companies have not had to worry too much about death claims arising out of coronavirus deaths. This comes despite India recording more than 100,000 deaths due to the deadly virus. 

As of October 1, the corporation settled Covid-related death claims of 523 families under 1,099 policies amounting to Rs 49.58 crore.

LIC, which is one of the largest investors in the equity markets, believes there is good upside left in the remaining part of this fiscal year. It has invested more than Rs 49,000 crore in the equity markets and will take further purchases as per emerging opportunities.

“As of September 2020, we have already invested Rs 2.63 trillion in government securities, state development loans, corporate bonds and equity. In the remaining part of this fiscal year, we plan to invest at least Rs 2 trillion in various investment instruments,” Kumar said.

As far as stress in its debt portfolio is concerned, Kumar said, “We find that corporates, where we have invested, are fulfilling their debt servicing obligations both in repayment of principal and interest. Very few companies have availed moratorium facility which is not even 2 per cent of corporate debt.”