Life insurers' new business premium spikes 42% at Rs 27,177 cr in Nov

Profitability a worry with excess reserves on balance sheet for Covid claims

Life insurers’ new business premium (NBP) reported stellar performance in November after a poor showing in October, on the back of strong growth in group single premiums for both private insurers and Life Insurance Corporation (LIC) of India. In November, 24 life insurers, including LIC, reported NBP to the tune of Rs 27,177 crore, up 42 per cent year-on-year (YoY) from the year-ago period.

Private insurers’ NBP rose 58.63 per cent YoY to Rs 11,209.75 crore as group single premiums more than doubled during this period. Private players saw their individual single premiums rise 32.5 per cent, while individual single premiums, as well as renewable premiums, posted decent growth in the same period.

NBP is the premium acquired from new policies in a particular year.

State-owned insurance behemoth LIC also posted impressive growth of 32 per cent in NBP during the same period after a muted performance in the last few months. LIC reported NBP of Rs 15,967.51 crore.

Among large private players, SBI Life witnessed exceptional growth of 150 per cent YoY in NBP, while other large entities like HDFC Life, ICICI Prudential Life, and Max Life Insurance posted NBP growth of over 25 per cent.

LIC is still commanding 63 per cent market share in terms of NBP and 71.84 per cent market share as far as the number of policies is concerned. When it comes to sum assured, LIC has 18 per cent market share, while 23 private insurers have 82 per cent of the market.

On an annualised premium equivalent basis in November, the industry grew 26 per cent YoY, which is due to LIC’s YoY growth at 22 per cent — a marked improvement over 2-per cent YoY degrowth till October.

“The economy has been responsive with gradual receding of Covid-19, coupled with a robust vaccination drive. Increasing interest and awareness about insurance among people towards securing life’s certainties is also aiding growth,” said Rushabh Gandhi, deputy chief executive officer, IndiaFirst Life Insurance.  

So far in the current fiscal year (2021-22, or FY22), life insurance companies have reported NBP to the tune of Rs 1.8 trillion, up 8.5 per cent YoY from the year-ago period, with private insurers recording 30 per cent growth. But LIC’s NBP is in the red, albeit marginally. In the first eight months of the fiscal year (8MFY22), LIC’s NBP was Rs 1.14 trillion, down 0.93 per cent YoY from the year-ago period.

Typically for life insurers, the last four-five months of the fiscal year draw a lot of business as people tend to buy greater pure-risk and savings products for tax-saving purposes.

Rating agency ICRA has estimated that life insurers will close the year (FY22) with 14 per cent growth in NBP, backed by pick-up in business in the second half of FY22. The NBP is estimated to grow 14 per cent in FY22 to Rs 3.18 trillion, as nominal gross domestic product is projected to grow 16 per cent, the rating agency had said.

Life insurers had posted a 7 per cent YoY growth in NBP in 2020-21, compared with 21 per cent growth in 2019-20.

While NBP growth is set to recover, profitability still remains a concern as insurers are carrying excess reserves on their balance sheet for future Covid-related death claims, should there be a spike in cases or a possible third wave. Life insurers have paid more than Rs 14,600 crore in 168,000 Covid-related death claims since the start of the pandemic.