Indian life sector’s new business premiums expected to rise in FY 2025

The industry could maintain a growth rate of 13% in the next 3-5 years.

New business premiums of India’s life insurance sector are expected to grow from a lower base in fiscal year 2025 driven by GDP expansion, urbanisation, demand for ULIPs, and improved digital distribution channels, according to CareEdge.

The industry witnessed a 23.8% year-on-year surge in Annual Premium Equivalent (APE) for September, up from the 10.5% in August, following a low base caused by frontloaded demand in March 2023. 

Individual non-single policies saw over 40% growth, with Life Insurance Corporation (LIC) outperforming the industry at 61.1%. LIC's APE grew by 19.3% in September 2024, reversing the 6.6% decline seen in September 2023. 

The industry's two-year compound annual growth rate (CAGR) from September 2022 to September 2024 was 13.0%, whilst private players recorded 18.8% growth, and LIC posted a 5.6% increase. Growth was driven by factors including higher sales of traditional policies, larger ticket sizes, and increased single premiums.

Saurabh Bhalerao, Associate Director at CareEdge, highlighted the Life Insurance Council's (LIC) dominance in the single premium sub-segment, especially in group business, whilst private players had a stronger presence in the non-single segment. 

He attributed LIC’s growth to policy pushes ahead of upcoming changes in surrender value norms, which could affect distributor commissions.

Meanwhile, Sanjay Agarwal, Senior Director at CareEdge Ratings, said new surrender value regulations, effective October 1, 2024, may lead to short-term volatility in premiums but are expected to benefit customers. 

CareEdge forecasts the industry will maintain a growth rate of 11% to 13% over the next three to five years, despite potential macroeconomic challenges.