December 5, 2021

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Private life insurers continue to grow, LIC posts muted performance in October 2021

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Private life insurance companies continued to grow in October 2021, registering a growth of 12.14 percent in first-year premiums compared to October 2020.

State-owned Life Insurance Corporation of India (LIC) on the other hand saw a contraction of 13.2 percent.

Overall, first-year premiums of life insurers saw a drop of 5.1 percent in October 2021 against an increase of 22.2 percent seen in the previous month, and fell to Rs 21,606 crore from Rs 22,776 crore in October 2020.

According to CARE Ratings, the drop in the monthly numbers can be attributed to a drop in individual single premiums in the public sector for October 2021.

As Covid-19 led to lockdowns that affected sales in FY21, a base effect is possibly seen in FY22. Analysts recommend looking at the two-year compound annual growth rate, where private players have shown strong momentum.

LIC’s muted performance

The 13.2 percent shrinkage in October 2021 at India’s largest insurer compares with a 36.1 percent in October 2020. In the fiscal year to October, LIC reported a drop of 4.8 percent against a 25.1 percent growth reported by private peers.

Last October, a few new plans were reintroduced, leading to a build-up of individual single premiums that has normalised in October 2021, CARE Ratings said in a note. If we compare October 2021 versus October 2019, individual single premiums have continued to show growth, it added.

Reinsurance pricing

Another factor that could impact the growth momentum is the rise in prices of term plans.

The price hike by reinsurers may lead to a rise in the premium amount as the second wave saw a rise of claims which has urged reinsurers to tighten underwriting norms, said Vishal Balabhadruni, BFSI analyst at CapitalVia Global Research.

Munich Re (a reinsurer) seems to have indicated to companies it underwrites that a price hike is on the cards. From December 2021 premiums are likely to increase by 30%, depending on age, sum assured and quality of life of the individual, Balabhadruni added.

Similarly, a senior private sector official at a leading life insurance company requesting anonymity said discussions are on with reinsurers and how much of the price hike will be passed on to customers will be decided after the upward revision is done by reinsurers.

To maintain profitability and neutrality, insurers might pass on the hike which could have a short-term impact but given the fundamentals of under-penetration and demand for protection, it won’t be a big concern in the medium to long term, an analyst said, requesting anonymity.

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