Life Insurance Sector Will Grow By 11-13% In Next Five Years: CareEdge

India's life insurance industry is set to maintain a robust growth trajectory, with CareEdge Ratings forecasting an annual growth rate of 11 to 13 per cent over the next three to five years. This optimistic outlook is based on the industry's recent performance data, which shows significant increases in premium collections and policy volumes.

The industry recorded a 20.2 per cent year-on-year growth in Annual Premium Equivalent (APE) in June 2024, largely due to a low base effect from the previous year. Notably, the Life Insurance Corporation of India (LIC) experienced a 20.8 per cent surge in APE, a substantial improvement from the mere 0.4 per cent growth seen in June 2023. Over a two-year period from June 2022 to June 2024, the compound annual growth rate (CAGR) for the industry stood at 14.3 per cent.

Policy volumes also showed positive trends, with the number of individual policies growing by 12.4 per cent year-on-year in May 2024. Premium collections from both individual policies and group premiums significantly contributed to the overall growth.

First-year premiums for June 2024 saw a 14.8 per cent increase, reaching Rs 42,433.7 crore, compared to Rs 36,961.8 crore in June 2023. Private insurers demonstrated a 17.3 per cent growth, while LIC reported a 13.6 per cent rise in first-year premiums.

Within premium types, non-single premiums rose by 22.9 per cent in June 2024, and single premiums increased by 12.5 per cent. LIC continues to dominate the single premium segment, whereas private players lead in the non-single premium category.

Market segmentation reveals that the private sector holds a larger share in individual premiums, while LIC maintains a strong presence in group premiums. Key drivers for LIC's single premium growth include pension plans, general annuity, and group gratuity schemes.

Average policy sizes have also increased, with private insurers reporting a 9.6 per cent rise and LIC showing a slight 0.8 per cent growth in June 2024. Additionally, the sum assured for life insurance companies has seen a significant uptick, reflecting higher coverage and premium collections.