For the second consecutive month in FY21, new business premium of life insurance companies has recorded negative growth owing to Covid-19 related disruptions. In May, the new business premium of life insurers contracted 25.4 per cent to Rs 13,739 crore from Rs 18,414 crore in the same period a year ago. In the first two months of FY21, life insurers saw their new business premium fall almost 30 per cent to Rs 20,466.76 crore compared to Rs 28,395.90 crore in FY20.
New business premium is the premium acquired from new policies for a particular year. Further, the overall sum assured too, declined by 20.2 per cent from Rs 5.8 trillion till May 2019 to Rs 4.7 trillion till May 2020.
While private life insurers, 23 in all, recorded a 28 per cent drop in new business premiums in May, state owned insurance behemoth – Life Insurance Corporation (LIC) – recorded a 24 per cent drop in its new business premiums.
For the most part of April and May, the country was in a lockdown and businesses found it difficult to conduct their operations, despite some relaxations from the government. The private life insurers focused more on digital distribution as the traditional mode of distribution -- agency force, bancassurance etc – was not possible amid the lockdown.
Yes Securities in a note said,”Commensurate surge has been seen in demand for insurance through the online channel”.
"Private insurers with their preparedness in the online channel, investments in insuretech and tie ups with web aggregators have an upper hand over LIC," the note added.
In the first two months of FY21, new business premium of private life insurers plummeted 30.71 per cent to Rs 9,631.27 from Rs 6,673.58 crore in the same period a year ago. Similarly, LIC’s new business premium in the first two months of FY21 dropped 26.49 per cent to Rs 13,793.18 crore from Rs 18,764.63 crore a year ago.
The top private life players – ICICI Prudential, SBI Life, HDFC Life, Bajaj Life Insurance and Max Life – reported a drop in their new business premium (NBP) numbers for May. While ICICI Prudential’s NBP dropped 2.3 per cent in May, SBI Life recorded a 31.3 per cent drop, HDFC Life’s NBP plummeted almost 47 per cent, Bajaj Life’s NBP also contracted 46 per cent and Max Life’s numbers dropped 18 per cent.
Only a couple of private insurers – Canara HSBC OBC Life Insurance, TATA AIA Life Insurance -- recorded positive growth in NBP in the month of May.
"The current numbers are a reflection of the impact COVID-19 has had on the life insurance industry. Customer sentiment is more here and now, keeping liquidity close to them and spending on immediate needs. Hence, the de-growth this month, and perhaps will be like this for a few more months to come. Having said that, there has been a rise in the sale of protection plans on account of the increasing awareness amongst customers on protecting their risks. We will have to wait it out till the year end to see how the sentiments change and its impact on our industry," said Tarun Chugh, MD&CEO, Bajaj Allianz Life.
“The decline in first year premium growth for private companies has been more pronounced as they had reported an increase of 46.9 per cent for the two months till May 2019, compared to a drop of 30.7 per cent till May 2020”, Care Ratings said in a note.
As of May, LIC has the largest share in the life insurance market with 67.39 per cent of the pie. The 23 private life insurers make up for 32.61 per cent of the life insurance market.
“Even as the strict lockdown has been lifted in June 2020, the life insurance business could actually witness a fall in the first quarter of FY21, while growth could potentially return in the second or third quarters for FY21. Companies which have undertaken investments to build a robust digital platform could witness faster growth compared to those who have lagged in building an online channel”, said Care Ratings in its note.
Life companies witnessed a drop in their total annualized premium equivalent (APE) of 23 per cent in May, while individual APE plummeted 32 per cent.