New sales have taken a hit as investors have deferred their investments in insurance due to the uncertainty, says industry officials.
Despite new business premiums (NBP) witnessing a growth of around 7% in July at Rs 22,986.10 crore compared to Rs 21,509.25 crore in July of previous fiscal, individual non-single plans have continued to see fall in premiums. New sales have taken a hit as investors have deferred their investments in insurance due to the uncertainty, says industry officials.
According to the Kotak Institutional Equities, individual annualised premium equivalent (APE) declined 7% y-o-y in July for private players. “Lockdown related disruptions across channels, moderation in protection business post hike in rate hikes by most players, and weaker capital markets appetite are likely factors,” said the Kotak report. However, individual APE for Life Insurance Corporation of India (LIC) was up 10% year-on-year.
APE is the sum of annualised first year premiums on regular premium policies, and 10% of single premiums, written by insurance companies during any period from both retail and group policyholders. The data from Insurance Regulatory and Development Authority of India (Irdai) shows that individual non-single premiums for July stood at Rs 5,368.49 crore as against Rs 5,557.99 crore in the last financial year, a drop of 3.41%.
Even in the first three months of the current financial year, individual non-single segment has continued to see negative growth. Vighnesh Shahane, MD & CEO at IDBI Federal Life Insurance says, “Individual business have taken a hit because investors are not comfortable meeting the distributors due to the social distancing norms. Another reason for individual business not picking up is because people are not sure about their financial situation due to the job losses, wage cuts and business failures. Before committing to long term plans investors wants to be sure of their financial situation.”
However, individual single premium saw strong growth in July for life insurance industry. Private life insurers saw the NBP for individual single premium at Rs 1,136.19 crore, a growth of 50.02% against same period of last year. LIC saw its NBP for individual single premium up by 68.59% at Rs 3,305.95 crore in July compared to Rs 1960.99 crore in July 2019.
Market participants say that surge in premiums for individual single premium can be attributed to higher sales in annuities business and single term plans. Tarun Chugh, MD & CEO at Bajaj Allianz Life Insurance says, “Our strong product portfolio, particularly our protection and guaranteed insurance products, have enabled us bring in several new customers. We also saw that existing customers are renewing their policies in a sustained manner, resulting in positive growth.”