India's life insurance annual premium equivalent drops 2.3% in December

This was in contrast to the 13.6% YoY increase in December the previous year.

India's life insurance industry reported a 2.3% year-on-year (YoY) contraction in Annual Premium Equivalent (APE) in December 2024, data from the Life Insurance Council (LIC) of India showed. 

This was in contrast to the 13.6% YoY increase in December the previous year.

The decline was primarily driven by a drop in group single premiums, following a significant surge in December 2023 that normalised this year. 

Changes in policy structures, including adjustments to the sum assured and commissions under revised surrender value guidelines effective 1 October 2024, contributed to the slowdown, Saurabh Bhalerao, associate director at CareEdge, said in a research note.

Challenges in the bancassurance channel and intensified competition across key distribution channels also weighed on performance.

LIC's business continues to rely heavily on the agency channel, which accounts for over 90% of its individual new business premiums. 

In contrast, private insurers derive more than 50% of their individual new business premiums from the bancassurance channel. 

According to Sanjay Agarwal, senior director at CareEdge Ratings, the distribution channel mix is likely to shift, with insurers emphasising the agency channel amidst changes in bank strategies and product regulations.

The industry's performance in the first half of FY25 was bolstered by strong demand for unit-linked insurance plans (ULIPs) and heightened activity ahead of the implementation of the surrender value guidelines. 

However, growth moderated in the subsequent quarter. Despite short-term volatility, recent regulatory changes are expected to benefit customers and support medium-term growth.

Looking ahead, the Insurance Amendment Act, which proposes composite licenses, 100% foreign direct investment (FDI) in insurance companies, and revised capital requirements, is anticipated to attract new entrants and improve market penetration. 

CareEdge projects the life insurance industry to grow at an annual rate of 11% to 13% over the next three to five years.