Better policy mix drives the growth for the private life insurers

Q1 (April-June quarter) is usually weak for life insurers as most policies are bought at the end of a financial year. In May 2025, year-on-year (Y-o-Y) growth witnessed a fall. May also saw 10.4 per cent fall in the life insurance policies sold. 

However, private insurers reported premium growth, indicating a mix of higher-value policies. 

The industry reported Y-o-Y growth of 12.7 per cent in May 2025, reaching ₹30,463.2 crore, after 8.4 per cent growth in April 2025. 

The expansion was across all segments except for a decline in LIC’s non-single premium. This was lower than 15.1 per cent growth in May 2024. It may be because surrender value regulations are still playing out. 

Private players reported growth in individual non-single premiums, while LIC saw 7.8 per cent decline. 

Annual premium equivalent (APE) rose 14.4 per cent Y-o-Y in May with APE up 13.2 per cent compound annual growth rate (CAGR) between May 2023 and May 2025. 

Private insurers grew at 13.8 per cent CAGR, versus LIC’s growth of 12.4 per cent. 

In May 2025, private players’ new business premiums (NBPs) increased 16.6 per cent, outpacing LIC’s 10.3 per cent. 

Growth is influenced by structural changes, such as adjustments to sum assured and commission structures following revised surrender value. 

Market volatility has reduced demand for unit-linked insurance plans (Ulips). 

 

In May, non-single premiums grew by 15.1 per cent. Single premiums saw 11.7 per cent rise. Single premiums are 2.5x larger than non-single premiums in absolute terms.

 

The private sector holds a larger share in non-single individual premiums, while LIC dominates the single premium group.

 

In May 2025, group premiums rose by 18.4 per cent compared to 13.1 per cent in May 2024. Individual premiums grew 3.3 per cent, much slower than 18.6 per cent growth in May 2024.

 

In May 2025, individual non-single policy sales declined by 10.5 per cent, versus 13.8 per cent growth in May 2024.

 

The decline in policies sold is due to new surrender value norms, (effective October 2024).

 

Private players coped by increasing the value of individual non-single policies. But the new policy mix may compress margins. 

 

A brief look at some insurers as follows:

 

HDFC Life

 

The management of HDFC Life says regulatory concerns and competitive pressures are receding. The target is to grow APE ahead of industry average and double value of new business (VNB) every 4-4.5 years.

 

The Q1FY26 is trending better with April-May 2025 posting 10 per cent retail APE growth (on a high base) and 14.4 per cent total APE growth.

 

The product mix is favourable with Ulips peaking-out and low base for group credit protection. This may aid VNB margin, but investment into distribution and technology may lead to margins remaining range-bound in the near-term. 

 

SBI Life

 

In Q4FY25, SBI Life’s net premium income declined 5 per cent Y-o-Y to ₹23,861 crore, driven by 42.1 per cent reduction in single premium income to ₹4,463 crore.

 

In FY25, NBP stood at ₹35,580 crore, with a private market share of 20.8 per cent. Individual NBP was ₹26,360 crore, up 11 per cent (private market share of 25.3 per cent).

 

In FY25, gross written premium came in at ₹84,980 crore, up 4 per cent. VNB rose 7.2 per cent to ₹5,950 crore, with VNB margin at 27.8 per cent. Embedded value grew 21 per cent to ₹70,250 crore.

 

Profit after tax was flat (up 0.3 per cent Y-o-Y) at ₹814 crore in Q4FY25. The company is focused on long-term growth and is strengthening agency and banca channels. 

 

Max Life

 

Max Life is an APE growth leader with two-year APE CAGR of 18.5 per cent compared with 0.1-12.8 per cent for peers.

 

There was a 735 basis points (bps) rise in share of Ulips but share of low-margin retail APE has peaked and is down, according to the management.

 

Max Life has a healthy return on embedded value of 19.1 per cent in FY25 and changes in holding company structure could lead to valuation upgrade.