After witnessing a year-on-year drop in first-year premiums in Q1 FY21, the life insurance sector reported positive growth in Q2 FY21, according to a CARE report.
The first-year premium of life insurers grew by 26.5% in September to Rs 25,366 crore, compared to Rs 20,057 crore in September 2019, driven by group insurance premium growth. The LIC of India continues to dominate the group insurance premium segment. The life insurance sector continues to report a drop in first-year premium collection as businesses have been severely impacted by the COVID-19 pandemic. However, the sector seems to be moving back slowly to normalcy.
The sector reported a decrease of 0.8% in first-year premium to Rs. 1,24,727.6 crore in H1 FY21 from Rs. 1,25,758.1 crore in H1 FY20 (compared to an increase of 35.1% reported in H1 FY20). This is a positive step as the sector had seen its first year decrease at 18.6% to Rs. 49,335 crore in Q1FY21 from Rs. 60,637 crore in Q1FY20, and on the other hand, Q2FY21 reported an increase of 15.8% to Rs.75,392 crore from Rs 65,121 crore in Q2FY20, which is indicative that the sector seems to be moving towards recovery.
However, the overall sum assured declined by 7.5% from Rs 21.6 lakh crore in H1 FY20 to Rs. 20 lakh crore in H1 FY21 (compared to an increase of 8.1% reported in H1 FY20). LIC’s first-year premium dropped by 2.2% in H1 FY21, compared to a growth of 41.7% in H1 FY20. On the other hand, private companies reported a growth of 2.6% in H1 FY21 versus growth of 20.9% in H1 FY20.
LIC continues to maintain its dominant share in the first-year premium for H1 FY21 (LIC share of 70.6% vs. 29.4% share of private companies); the share in sum assured for private companies has declined marginally by 1.7% in H1 FY21 when compared with H1 FY20. In sum assured, private companies have a share of 85.7% (vs 87.5% in H1 FY20) due to their focus on pure protection plans and a strong digital presence.
Even as the industry reported a marginally negative growth for H1 FY21, nine insurance companies reported a growth in their first-year premium collection. Aditya Birla Sun Life, Aviva Life, Canara HSBC OBC Life, Edelweiss Tokio Life, HDFC Life, Max Life, SBI Life, Star Union Dai-ichi Life and Tata AIA Life reported a growth of 40.6%, 3.7%, 27.4%, 4.7%, 6.9%, 9.0%, 15.2%, 21.5%, and 23.5% respectively for H1 FY21.
The Corona pandemic has created a rise in the demand for protection plans, while market volatility has dented the demand for linked plans. The life insurance business has witnessed a fall in Q1FY21 due to lockdown and business disruption. However, growth seems to have returned in Q2FY21. The industry is expected to grow in single digit for the year as compared to a double-digit growth witnessed last year. Overall, the outlook is expected to be stable in the medium term.