LIC Outpaces Private Sector In Individual Non-single Premium Growth In Sep
LIC’s growth for the first half of FY25, the growth has been higher than the private players primarily due to group single premiums and low base effect
The life insurance industry reported significantly higher sequential annual premium equivalent (APE) growth of 23.8 per cent year-on-year (YoY) in September 2024 as compared to 10.5 per cent in August 2024 on a low base as previous months had been weak for most life insurance companies as demand had been frontloaded to March 2023, CareEdge Ratings has said.
Meanwhile, individual non-single policies grew by over 40 per cent in September 2024 with LIC outpacing industry growth at 61.1 per cent. LIC reported 19.3 per cent APE growth in September 2024 (driven by individual premiums), in contrast to the 6.6 per cent decline recorded in September 2023.
The two-year CAGR was 13.0 per cent for the industry, private players stood at 18.8 per cent, while LIC witnessed a growth of 5.6 per cent. Low base effect, sales on traditional policies before the implementation of new surrender value norms, increased insurance coverage, increase in ticket sizes and increase in single premium drove the growth in life insurance premiums in H1FY25.
LIC’s growth for September 2024 has been lower when compared to its private peers (due to individual non-single premiums). On the other hand, for the first half of FY25, the growth has been higher than the private players primarily due to group single premiums and low base effect, as per the CareEdge.
For September 2024, non-single premiums rose by 27.1 per cent compared to 11.4 per cent in September 2023, while single premium growth was positive 7.6 per cent (driven by LIC) compared to a reduction of 24.5 per cent in September 2023. On the other hand, for H1FY25, single premiums experienced higher growth compared to non-single premiums.
The private sector has a larger share in the non-single sub-segment (mainly individual premiums), while LIC continues to dominate the single premium sub-segment, especially the group business. Pension plans, general annuity and group gratuity schemes account for a sizeable chunk of the group while general annuity plans dominate individual single premiums, it added.
For September 2024, the group premiums growth rate turned positive to 4.0 per cent, from a reduction of 28.1 per cent in September 2023. Meanwhile, individual premiums rose by 27.5 per cent compared to the 10.5 per cent growth in September 2023. Individual premiums continue to remain smaller in size compared to group premiums.
According to the CareEdge, the private sector has maintained its lead in the individual segment, while LIC continues to dominate the group segment.
Saurabh Bhalerao, Associate Director, CareEdge said, “Life insurance APE reported significantly higher sequential APE growth of 23.8 per cent YoY in September 2024 as compared to 10.5 per cent in August 2024 on a low base as demand had been frontloaded to March 2023. LIC reported 19.3 per cent APE growth in September 2024 (driven by individual premiums). The private sector has a larger share in the non-single sub-segment (mainly individual premiums), while LIC continues to dominate the single premium sub-segment, especially the group business."
Bhalerao added that the individual non-single policies grew by over 40 per cent in September 2024 with LIC outpacing industry growth at 61.1 per cent, the growth which could be attributed to the distribution channels pushing policies before the changes in surrender value norms as these changes would impact distributor commissions. A further higher share of ULIPs in the product mix could impact margins.
Sanjay Agarwal, Senior Director, CareEdge Ratings stated, “The new business premium in FY25 is expected to increase from a comparatively lower base while the growth in total premium is anticipated to remain intact, especially in individual coverage segment. 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, and digital infrastructure amplifying multiple distribution channels. IRDAI has announced new regulations regarding surrender values, which will be from 1 October 2024."
Agarwal added that the product and commission structure could likely to witness significant changes, leading to volatile premium movement in the second half of the current fiscal. However, as these changes are expected to be 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 mentioned.
