India’s new business premium dips 18.5%

Its group single premium contraction offset individual premium growth.

India’s first-year premiums saw a decline of 18.5% in August, attributable to a sharp drop in group premiums, particularly from LIC (Life Insurance Corporation of India), along with the impact of the new tax regime and high activity in March, CareEdge Ratings said. 

However, private insurance companies managed to partially offset the decline in LIC premiums, although their growth rate has slowed compared to the previous year.

Year-to-date (YTD) FY24 new business premiums for life insurers saw a 12.3% decline compared to the substantial 40% growth seen in YTDFY23. 

The year-on-year decline is primarily due to group premiums, particularly single premiums, and LIC's performance. 

Despite this decline, YTD FY24 growth compared to YTD FY22 is over 25%, indicating a potential normalization of growth. Private insurance companies continued to grow, especially in the individual space.

In August 2023, private insurers maintained their growth but at a reduced rate of 13.9%, compared to 23.9% in August 2022. 

Conversely, LIC's first-year premium dropped by 34.7% in August 2023, mainly due to reduced single premiums and the attractiveness of the new tax regime for individual taxpayers.

For August 2023, non-single premiums increased by 11.1%, while single premiums continued to decline by 29.2%. 

Despite the decline, single premiums still contribute significantly to overall first-year premiums. Private insurers dominate the non-single sub-segment, while LIC remains strong in the single premium sub-segment, particularly in group business and annuity plans.

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In August 2023, group premiums fell by 33.5%, primarily due to the single premium segment's performance, while individual premiums increased by 11.4%. For YTD FY24, group premiums continued to decline, while individual premiums showed modest growth.

In FY23, the life insurance industry experienced substantial growth, driven by factors such as the easing of COVID-related constraints and increased demand for term policies and annuity products. 

However, the introduction of the new tax regime in April 2023 had a noticeable impact on the sector's activities, resulting in a subdued performance in FY24's initial phase. 

Nevertheless, the long-term growth potential of the life insurance sector remains positive, supported by factors like the existing protection gap in the market, a conducive regulatory framework, and the ongoing need for insurance coverage. 

CareEdge anticipates strategic adjustments in policy portfolios to fuel growth, albeit at a more measured pace in FY24. Monitoring these developments will be essential to accurately assess the sector's growth momentum. Despite temporary fluctuations, the life insurance segment's overall growth outlook remains resilient.