Private insurers offset LIC premium drop amidst policy changes

The decline was driven by adjustments to the sum assured and commissions.

India’s life insurance industry recorded a 3.5% year-on-year decline in Annual Premium Equivalent (APE) for February 2025, following a 25.8% increase in February 2024. 

“Private life insurers were able to offset the drop in LIC (reduction in group single premiums) for the month,” Saurabh Bhalerao, Associate Director, CareEdge Ratings, said in a research note.

The decline was driven by adjustments to the sum assured and commissions due to revised surrender value guidelines that took effect on 1 October 2024. 

Additionally, challenges in the bancassurance channel and heightened competition in key areas contributed to the downturn.  

Sales of Individual Non-Single policies fell 23% in February 2025, reaching 18.4 lakh policies compared to the previous year. 

Despite this, the industry’s compound annual growth rate (CAGR) from February 2023 to February 2025 stood at 8.2%, with private insurers achieving a 15.3% growth rate, whilst LIC saw a decline of 2.2 percentage points.  

Sanjay Agarwal, Senior Director at CareEdge Ratings, noted that the top four private insurers accounted for nearly 30% of the market share. 

He highlighted the increased focus on the agency channel due to banks’ emphasis on deposit gathering. 

“Meanwhile, the updated product and commission structure, resulting from the recently enacted new regulations concerning surrender values, has been causing volatile premium movements,” Agarwal stated.

The proposed Insurance Amendment Act is expected to improve market penetration by attracting new insurers. 

CareEdge forecasts the life insurance industry to grow by 11% to 13% over the next three to five years.