Premium from new policies up 30 per cent in April.
A turnaround in Life Insurance Corporation (LIC) of India’s fortunes has boosted the insurance industry’s sales, which rose the fastest in two years.
The country’s 22 life insurance companies saw 29.5 per cent rise in premium collected through sale of new policies to Rs 3,602 crore in April 2009, as against Rs 2,780 crore in the corresponding period last year. This is the fastest growth since April 2007, when the industry witnessed 49.6 per cent rise in first premium income.
But insurance company executives are still cautious and say it is too early to see if there is a revival since a large part of the growth has come from the group insurance business and that too in the single-premium segment.
In 2008-09, life insurance sales had fallen by 6.32 per cent as investors ran away from unit-linked insurance plans (Ulips), which invest 85-90 per cent in equities. In the wake of the global financial crisis, the Bombay Stock Exchange’s Sensex fell 38 per cent during the last financial year, resulting in risk aversion to instruments with large exposure to equities.
While the Sensex has gained 82 per cent since March 9, investors are not back to buying Ulips yet, insurance company executives say, pointing out that the private players are still seeing a drop in premium from sale of new policies.
| WIDER COVERAGE Life insurers' first year premium collection (Rs crore) | |||
| Insurer | April ‘08 | April ‘09 | % change |
| LIC | 1247.89 | 2113.11 | 69.33 |
| SBI Life | 171.91 | 460.26 | 167.73 |
| Bajaj Allianz | 187.77 | 163.20 | -13.08 |
| Max New York Life | 119.17 | 145.19 | 21.83 |
| ICICI Prudential | 344.79 | 135.82 | -60.61 |
| Relinace Life | 157.92 | 110.78 | -29.85 |
| HDFC Standard Life | 120.39 | 98.95 | -17.80 |
| Birla Sun Life | 91.95 | 82.92 | -9.82 |
| ING Vyasa | 30.19 | 37.76 | 25.07 |
| Aviva Life | 41.73 | 32.57 | -21.95 |
| Private total | 1532.22 | 1488.48 | -2.85 |
| Total | 2780.11 | 3601.58 | 29.54 |
In case of LIC, which recorded 69.33 per cent growth in first-year premium during April, a bulk of the growth came from the group single premium segment, where the first premium income rose over six times to Rs 929.62 crore, as against Rs 151.13 crore in the corresponding period last year. Similarly, individual single premium rose to Rs 426.90 crore from Rs 366 crore in the corresponding period of last year.
As a result of the increase in premium collection, LIC’s market share increased to 58.67 per cent. The insurance major had been losing markets share in the last few years.
LIC’s new business premium had declined by 10 per cent in the last financial year while the private players’ grew their business by 1.03 per cent.
Even in case of SBI Life, the second-largest life insurance company, the trend was similar.
“Since the growth is coming from the group business, especially the single-premium segment, it may be difficult to sustain it,” said a senior executive with a life insurance company.
LIC executives could not be reached for comment but in a recent interview, the company’s Managing Director, DK Mehrotra, had told Business Standard that the public sector player intended to focus on traditional policies to improve sales during the current financial year.
For private players, first-year collections fell by 2.85 per cent in April.
ICICI Prudential slipped from the second position to fifth in the April collection, with SBI Life taking over as the largest private sector life insurer.
Of late, insurers have been focusing on profitability. They are consolidating their business by bringing down their expansion plans. For instance, Reliance Life has reported 30 per cent dip in its first-year premium as against 28 per cent growth in 2008-09. It put on hold expansion after getting regulatory approval for opening 400 branches.
Similarly, ICICI Prudential is looking at consolidation. The company posted Rs 577 crore net loss in 2008-09.
“Promoters do not like to put money in a business that is not profitable for long. This has forced insurers to look at profitability by contracting growth,” said an insurance analyst.
