LIC's tepid show pulls life insurers' new business premium down 5% in Oct

Private life insurers total APE and individual APE up 19% and 23% respectively

After recording impressive growth in September, new business premiums (NBP) of 24 life insurance companies degrew 5 per cent year-on-year (YoY) in October, mainly due to Life Insurance Corporation (LIC) of India’s muted performance.

In October, the industry received NBP to the tune of Rs 21,606 crore, down 5.14 per cent YoY from the year-ago period. While private insurers’ NBP recorded double-digit growth of 12 per cent to Rs 8,105.46 crore, LIC’s NBP degrew more than 13 per cent to Rs 13,500.78 crore due to massive decline in individual single premiums and muted growth in group single premiums.

NBP is the premium acquired from new policies in a particular year. Among large private players, HDFC Life, ICICI Prudential Life, and Max Life reported double-digit growth in NBP in October. SBI Life, on the other hand, saw its NBP grow 6 per cent in the same period.

On an annualised premium equivalent (APE) basis, private insurers reported 19 per cent growth in total APE and 23 per cent in individual APE. However, month-on-month, private life companies reported a decline in total APE. APE is the total value of regular or recurring premiums plus 10 per cent of new single premiums written in the period.

So far in the current fiscal year (2021-22, or FY22), life companies have reported NBP to the tune of Rs 1.53 trillion, up 4.12 per cent YoY from the year-ago period, with private insurers recording 25 per cent growth. But LIC’s NBP is in the red, with almost 5 per cent degrowth in the same period, driven by decline in individual single premium and group non-single premium.

“LIC continues to maintain its dominant share in the first-year premium for year-to-date October FY22 (LIC share of 64.2 per cent versus 35.8 per cent share of private companies). Private sector has continued to gain market share, given that it has been growing at a faster pace, compared to LIC,” CARE Ratings said in its report.

Emkay Research said, “With its unchanged way of doing business over decades, LIC seems to be quickly losing its stronghold in the retail life segment, particularly in the high-ticket segment”.

“LIC, for decades, has primarily relied on agent-driven distribution to sell its traditional savings-heavy products. With bank-channel becoming increasingly important for savings product distribution and digital channels becoming important for retail protection, LIC seems to be losing the plot,” the report added.

In Q2FY22, the industry recorded 5 per cent YoY growth in NBP over the same period last year, with private insurers growing at 24 per cent and LIC recording 4 per cent contraction in premium. In the first quarter (Q1), growth was muted due to the second wave of the pandemic and also because Q1 of any financial year is generally slow for the industry.

The sector was beginning to see some green shoots since August, with focus on annuity, non-par, and unit-linked products.

 Industry experts said while the pandemic has proved to be a decisive moment for the industry as it has heightened the risk awareness of consumers and consequently the demand for insurance products, a lot will depend upon how insurers manage to take advantage of this situation by overcoming the supply-side constraints that still persist in the industry.