Private Firms Report 30% Growth In Individual APE In July 2024
CareEdge anticipates that the life insurance industry will sustain a growth rate of approximately 11 to 13 per cent over the next three to five years
A recent report by CareEdge Ratings has revealed that the private companies reported 30 per cent growth in individual annual premium equivalent (APE) for July 2024. The life insurance industry reported 16.3 per cent YoY APE growth in July 2024 on a low base as July 2023 had been a weak month for most life insurance companies as demand had been frontloaded to March 2023.
Meanwhile, the growth in the number of individual policies was tepid at 2.7 per cent in July 2024. LIC reported 13.6 per cent APE growth in July 2024 (driven by group premiums), in contrast to the 20.7 per cent decline recorded in July 2023. The two-year (July 22 – July 24) CAGR was 7.5 per cent for the industry, private players stood at 18.8 per cent, while LIC witnessed a decline of 5.1 per cent.
It added that the low base effect, increased insurance coverage, increase in ticket sizes and increase in single premium drove the growth in life insurance premiums in the first four months of FY25.
Life Insurance Corporation's (LIC’s) growth for July as well as for the first four months of FY25 has been higher when compared to its private peers primarily due to group single premiums and low base effect (In July 2023, the aggregate decrease can continue to be attributed to higher momentum in March 2023, reduced single premiums, primarily LIC and as the new tax regime has been made more attractive and the default tax regime for individual taxpayers).
For July 2024, the group premiums growth rate turned positive to 9.7 per cent, from a reduction of 43.1% in July 2023. Meanwhile, individual premiums rose by 20.7 per cent compared to the 12.5 per cent growth in July 2023. Individual premiums continue to remain smaller in size compared to group premiums. The private sector has maintained its lead in the individual segment, while LIC continues to dominate the group segment.
Sanjay Agarwal, Senior Director, CareEdge, “The new business premium in FY25 is expected to increase on a comparatively lower base while the growth in total premium is anticipated to remain intact. The growth drivers include prudent underwriting, GDP growth, rapid urbanisation, demand for ULIPs (based on market performance) and protection plans, younger demographic driving insurance coverage, rising retirement planning awareness, and digital infrastructure amplifying multiple distribution channels. IRDAI has announced new regulations regarding surrender values, to be implemented from 01 October 2024."
Agarwal added that the product and commission structure could likely witness significant changes, leading to volatile premium movement in the remaining fiscal. However, as these changes are favourable for customers, the growth is likely to rise over the medium term.
CareEdge anticipates that the life insurance industry will sustain a growth rate of approximately 11 to 13 per cent over the next three to five years.
“There is likely to be increased emphasis on the agency channel, driven by banks' focus on deposit gathering and companies' efforts to reduce reliance on bancassurance. Meanwhile, any potential adverse macroeconomic conditions could impact growth. Despite these challenges, the medium-term outlook remains positive overall,” Agarwal added.
