The new business premium of the life insurers contracted for the second consecutive month, significantly impacted by the spread of the deadly virus and the subsequent lockdown enforced by the government. new business premium in April declined 32.6 per cent to Rs 6,728 crore from Rs 9,928 crore in the same period a year ago.
State owned insurance behemoth – Life Insurance Corporation – saw its new business premium decline 32 per cent to Rs 3,582 crore from Rs 5,268 crore a year ago. Private insurers witnessed a decline of 33.3 per cent in new business premium for the month of April 2020 at Rs 3,146 crore as opposed to Rs 4,714 crore in April 2019.
Further, the overall sum assured declined by 16.4 per cent from Rs 2.72 trillion in April 2019 to Rs 2.27 trillion in April 2020 (compared to an increase of 29.3 per cent reported in April 2019).
Among large private insurers, HDFC Life’s new business premium (NBP) declined 53 per cent to Rs 669 crore while ICICI Prudential Life Insurance saw its NBP decline almost 60 per cent to Rs 256 crore. But SBI Life saw a marginal increase of 0.5 per cent to Rs 917.43 crore.
“If the above trend continues, the life insurance business could witness negligible growth in the first quarter of FY21 due to the extended lock down, however protection plans could witness an increase due to rising awareness and the online channel could see robust growth”, said a report by rating agency Care.
As far as annualised premium equivalent (APE) is concerned, the private insurers witnessed a 40 per cent decline in individual APE. The annual premium equivalent 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.
According to Kotak Institutional Equities, “While the month of April 2020 is expected to be a washout for many segments of the economy, life insurance companies were able to deliver 60 per cent of April 2019 individual APE. This is better than our expectation of 90-95 per cent decline for large players”.
“Volumes for the month of April typically reflect some spillover of the year-end business. With sudden pause in business activity in last 10 days of March 2020, the spillover may have supported business despite the lockdown. Additionally, demand for protection policies would have likely increased due to higher appetite for these policies post Covid-19 and sunset period of the old pricing regime”, it added.
While HDFC Life reported a 28 per cent decline in individual APE in April 2020, ICICI Prudential Life Insurance reported a 55 per cent decline individual APE because of likely slowdown in the unit linked segment. Similarly, SBI Life’s individual APE declined 73 per cent as the company has a higher share of unit linked products and the banca channel of the insurer, which gives 70 per cent of the business to the insurer, was weak due to the covid19 related disruption.