The life insurance industry saw a 2.7 per cent contraction in premium collection in December, a second consecutive month of decline.
Insurers earned new business premiums (NBP) of Rs 24,383.42 crore during the month, compared to Rs 25,079.79 crore in December 2019. While private insurers, 23 in total, recorded a 22 per cent growth rate, state insurance behemoth, Life Insurance Corporation, saw its NBP contract 15 per cent. NBP is the premium acquired from new policies in a year.
Top private insurers such as HDFC Life, ICICI Life, and Max Life Insurance registered double-digit growth in December.
In November, the NBP of the industry totalled Rs 19,159.31 crore, compared to Rs 26,221.24 crore in the same period last financial year (FY20). While private insurers had seen their NBP decline 5.15 per cent to Rs 7,066.65 crore, LIC’s NBP had fallen over 35 per cent to Rs 12,092.66 crore.
After witnessing growth in NBP for four straight months starting from July, the collection had fallen in November. Experts had suggested the decline was on account of a high base and December would see normalisation.
In Q3FY21, the industry was again in the red, with NBP contracting 3.2 per cent to Rs 66,318.76 crore, compared to Rs 68,572.89 crore in Q3FY20. LIC’s NBP declined more than 10 per cent but private insurer’s NBP rose 13 per cent. In Q1FY21, life insurers saw their premiums decline 18.5 per cent YoY owing to the pandemic-induced lockdown. However, recovery followed soon after, aided by a surge in demand for insurance products as the pandemic accelerated adoption of insurance in the country.
As a result, in Q2FY21, life insurers saw their new business premiums rise 16 per cent YoY.
Similarly, in the first nine of months of FY21, the sector saw NBP decline 1.7 per cent to Rs 1.91 trillion. Despite that, the private insurers are in the green, with an almost 7 per cent rise over last year but LIC’s NBP declined over 5 per cent.
As the pandemic struck India, demand for pure protection products spiked. Even guaranteed products saw a huge demand as many consumers stopped looking for higher returns and tilted towards some form of stability. Hence, demand for unit-linked plans declined.
But with the number of infections falling and vaccines getting approvals, the initial euphoria for protection products has come down. Unit-linked policies have again started gaining traction.
According to experts, growth will be driven by pension products, life cover products, supportive regulations, effective distribution and, improving customer services. “The industry is expected to grow in single digits for the year as compared to a double-digit growth witnessed last year. The medium-term outlook is stable,” said experts.