Life insurers see 6% drop in new premium income

For the first time since the sector was opened up, the life insurance industry has suffered a drop in premium from new business.

According to the latest data released by the Insurance Regulatory and Development Authority (Irda), premium from the sale of new life covers fell by 6.32 per cent to Rs 87,107.62 crore during 2008-09, as against Rs 92,988.71 crore in the previous financial year.

In just March this year, the new business premium collection fell by 28.21 per cent to Rs 15,091 crore, as against Rs 21,018 crore during the corresponding period in the previous year. Life Insurance Corporation of India (LIC), ICICI Prudential and Bajaj Allianz – the three largest players at the end of 2007-08 – also saw their new business premium decline from last year’s levels (see table).

SBI Life, which grew 12.35 per cent during 2008-09, has now emerged as the third-largest player, overtaking Bajaj Allianz, while Reliance Life has overtaken Birla Sunlife as well as HDFC Standard Life to become the fourth-largest life insurance company. LIC’s first premium income fell by 10.52 per cent to Rs 52,953 crore. At the same time, private insurers grew their premium collection by 1.03 per cent in 2008-09.

With stock markets crashing, the demand for unit-linked insurance plans was hit, resulting in a fall in the sale of new policies. In recent years, Ulips – which invest nearly 90 per cent of the money in stock markets – accounted for over 80 per cent of a life insurance company’s sales. Though companies tried to counter the fall by launching assured-return schemes and by hawking traditional covers, the strategy did not pay off as investors remained risk-averse. In addition, the average size of policies declined as individuals chose to hold on to cash in uncertain times, insurance companies said.

With the economy expected to revive in the second half of the current financial year, most insurers are expecting premium from new policy sales to rise by 6-7 per cent during 2009-10.
 

ON THE DOWNSLIDE New business premium collection of life insurance industry (in Rs cr)
Companies	Apr-Mar 08	Apr-Mar 09	Growth (%)
LIC	59182.20	52953.9	-10.52
ICICI Prudential	8306.00	6812.52	-17.98
SBI Life	4792.86	5385.00	12.35
Bajaj Allianz	6491.72	4491.61	-30.81
Reliance Life	2752.76	3514.00	27.65
HDFC Standard	2679.61	2644.00	-1.33
Birla Sunlife	1965.00	2823.91	43.71
Kotak Mahindra Old Mutual	1107.00	1343.00	21.32
Tata AIG	967.78	1143.00	18.11
Aviva	1059.0	724.0	-31.6
Private Total	33,806.00	34,153.71	1.03
Total	92,988.71	87,107.62	-6.32

While LIC is finalising its business targets for the current financial year, a source at the public sector company said that the insurer would target double digit growth in 2009-10. While Ulips are still not a focus area for LIC, it is banking heavily on traditional covers and assured return schemes during the current financial year as well. The company is planning to launch five-six such plans during the financial year, LIC Managing Director D K Mehrotra said.

ICICI Prudential expects the growth rate to pick up in the second half of the current financial year but was expecting low growth to continue as the economy is projected to grow by 6 per cent during the 2009-10.

However, SBI Life Managing Director and CEO US Roy said that the company is targeting 50 per cent growth during the year, while projecting 15-20 per cent growth for the industry.