After witnessing growth in new business premiums (NBP) for four straight months starting from July, life insurance companies saw their NBP decline almost 27 per cent in November, with state owned insurance behemoth Life Insurance Corporation (LIC) dragging the industry performance.
In November, the NBP of the industry totaled Rs 19,159.31 crore, compared to Rs 26,221.24 crore in the same period last financial year (FY20). While private insurers saw their NBP decline 5.15 per cent to Rs 7,066.65 crore, LIC’s NBP declined more than 35 per cent to Rs 12,092.66 crore. In the same period last financial year, LIC had amassed NBP of Rs 18,770.56 crore. NBP is the premium acquired from new policies in a year.
In the April – November period of FY21, NBP of life insurers declined by 1.5 per cent to Rs 1.66 trillion, as against Rs 1.69 trillion in the same period last financial year. LIC’s premium collection dropped 3.75 per cent to Rs 1.15 trillion from Rs 1.20 trillion in the same period but private insurers reported a growth of almost 4 per cent in NBP to Rs 51,004.23 crore, compared to Rs 49,078.27 crore.
According to a report by Kotak Institutional Equities, Individual annualised premium equivalent (APE) for the private sector insurers declined 7 per cent year on year (YoY) in November 2020, while group APE was down 12 per cent (YoY) translating to 7 per cent YoY decline in overall APE. APE is the sum of the total value of regular–or recurring–premiums plus 10 per cent of any new single premiums written for the fiscal year.
“Notably individual APE growth turned positive in September 2020 (up 4 per cent YoY) as the lockdown eased, and was up 14 per cent YoY in October 2020, but declined YoY in November. This may be due to a high base effect; November 2019 was a strong month for the private industry with 27 per cent growth as compared to 3-4 per cent growth in September and October 2019”.
Experts believe, this will normalise from December and in fact a low base of March 2020 (due to the sudden lockdown) will likely provide a big boost.
In Q1FY21, life insurers saw their new business premiums decline 18.5 per cent YoY due to the pandemic induced lockdown. However, recovery followed soon after, aided by a surge in demand for insurance products, especially for term and health products, due to the uncertainty the pandemic created in the minds of the consumers. As a result, in Q2FY21, life insurers saw their new business premiums rise 16 per cent YoY.
Experts have suggested, it is still a tale of two cities within the life sector where certain companies have bounced back very strongly and others continue to struggle. And, the struggle could be attributed to challenges at the shareholder level, solvency or it could be because of the inability to pivot and change their business model adequately.