Life insurance industry to recover in next quarter, says CARE Ratings

CARE Ratings, in a note, said growth could potentially return in Q2 or Q3 and distribution channels could see significant realignment, with digital sales rising at the cost of individual agents.

Life insurers, which have seen their first-year premiums contract 18.6 per cent in the first quarter of the financial year 2020-21 (FY21), could see recovery in the next quarter, said CARE Ratings. Life insurers also saw the sum assured decline 12.9 per cent from Rs 10 trillion in Q1FY20 to Rs 8.8 trillion in Q1FY21. However, despite a sharp dip in premiums, experts believe the industry is recovering from the initial shocks of the lockdown as June was better compared to May and April.

CARE Ratings, in a note, said growth could potentially return in Q2 or Q3 and distribution channels could see significant realignment, with digital sales rising at the cost of individual agents and bancassurance.

Life Insurance Corporation, the country’s largest life insurer, has 74 per cent market share, against private insurers’ 26 per cent, notwithstanding the technological deficiencies it has against its counterparts in the private sector.

Among the private insurers, five of the 23 have reported growth. SBI Life has the largest market share among private insurers in terms of first-year premiums, followed by HDFC Life, ICICI Prudential, Aditya Birla Sun Life, and Max Life.

Covid-19 impact: Life Insurer's new business premium declines 32% in March

For the month of March, the new business premiums of life insurance companies stood at Rs 25,409 crore compared to Rs 37,459 core in March 2019.

The new business premiums of life insurance companies declined 32 per cent in the month of March, owing to the disruption caused by the spread of coronavirus (Covid-19) and the subsequent lockdown enforced by the government to contain its spread.

For the month of March, the new business premiums of life insurance companies stood at Rs 25,409 crore compared to Rs 37,459 core in March 2019. The private life insurers, 23 in total, saw their new business premiums decline by 34.21 per cent in March 2020 at Rs 8,342 crore compared to Rs 12,682 crore in the same period of the last financial year.

Similarly, state-owned life insurance behemoth – Life Insurance Corporation (LIC) – saw its premiums decline by 31.11 per cent in the reporting month. In March 2020, it collected new business premiums to the tune of Rs 17,066 crore compared to Rs 24,776 crore in March 2019.

However, for the entire fiscal year (FY20), life insurers saw new business premium grow 20.6 per cent to Rs 2.58 trillion compared to Rs 2.14 trillion in FY19. LIC outpaced the private insurers in new business premium growth in FY20. LIC’s premium grew 25.17 per cent to Rs 1.77 trillion while private insurers reported an 11.64% per cent growth to Rs 80,919 crore.

The last quarter is very significant for life insurers as they sell a lot of products during this time, especially the last month of the fiscal year. But with the lockdown, the business of life insurers got impacted severely.

Experts have said that in the near term, with extension in lockdown, social distancing norms in place, the new business of life insurers will take a hit.