The three key messages coming out of the life insurance sector’s 9MFY22 new business product mix data are: (1) Unit-linked insurance plans (Ulips) are making a strong comeback; (2) pension products and non-par (savings and protection together) continue to grow strongly, but annuity and par savings seem to be struggling; and (3) the materially slow growth in sum assured from individual new business vs. premium growth very clearly reflects the slowing volume of retail protection amid multiple rounds of price hikes by leading private life insurers.
These developments are the outcome of a combination of factors, including low interest rates, buoyant equity markets, increasing financial sophistication of customers and product innovation by the leading private life insurers. Thus, large private players, equipped with their superior brands and distribution network and employing their agile and innovative approaches, are well-poised to grow strongly and increase their market share.
Product mix changes
The change in new business product mix in 9MFY22 has been shaped by a combination of external factors, including a sustained low interest rate environment, buoyant equity markets and Covid-19-led dislocations (additional savings of upper middle/ affluent class but clipped savings ability of masses). These external factors, along with changing customer preferences, have driven the changes in new business mix toward Ulip, non-par and pension products.
Ulips delivered strong bounce-back
Strong equity markets and increased savings of affluent and white collared youth with higher risk appetite meant that Ulips delivered strong growth in individual regular new business (49% y-o-y to Rs 130 billion) and in individual single premium new business (85% y-o-y to Rs 43.3 billion). Non-par continued to grow sustainably, with its share in individual regular new business going to 24% in 9MFY22 from 19% in 9MFY20.
This is an outcome of two factors: (1) Growing demand of guaranteed products amid depressed low interest rates offered by banks on time deposits; and (2) Multiple price hikes in retail protection in the last two years. Pension products continue to grow attractively, likely reflecting the robust demand by the customers and increased focus of leading players in this segment.
Edited extracts from Emkay Global’s report on life insurance