After witnessing a marginal year-on-year (YoY) rise in new business premiums (NBP) in June, following a dip in May due to the second wave of the Coronavirus (Covid-19) pandemic, the life insurance industry’s NBP has again dropped in July, mainly due to the contraction in business seen by the state insurance behemoth — Life Insurance Corporation (LIC).
In July, life insurers, 24 in total, earned a new business premium of Rs 20,434.72 crore, down 11 per cent YoY from last year. While the private insurers managed to report a 7.53 per cent increase in NBP in July 2021 over last year, LIC saw its NBP contract almost 21 per cent YoY to Rs 12,030.93 crore. In June, LIC reported an NBP of Rs 21,796. 28 crore, down 4.13 per cent on a YoY basis. Sequentially, i.e on a month-on-month basis, LIC’s NBP contracted by 44.8 per cent. The dip in LIC’s NBP was on account of a steep fall in individual single premium and group single and non-single premium.
NBP is the premium acquired from new policies in a particular year.
When compared to the pre-pandemic period (July 2019), NBP of the life insurance industry witnessed a drop of 5 per cent, with LIC’s NBP declining by 21.42 per cent, but private insurer’s NBP posting a stellar growth of 35 per cent.
On a year-to-date (YTD) basis, the life insurance industry saw a marginal 1.16 per cent YoY growth in NBP to Rs 73,159.98 crore. While LIC’s NBP till July totaled Rs 47,631.62 crore, down 8 per cent YoY, private insurers saw their NBP rise 24 per cent YoY to Rs 25,528.26 crore. In the first quarter of FY22, the premium collection of the life insurance industry was up almost 7 per cent to Rs 52,725.26 crore YoY, aided by a stellar 33.73 per cent growth registered by the private insurers. However, LIC’s NBP in Q1FY22 declined 2.5 per cent YoY to Rs 35,600.68 crore.
Due to the second wave of the Covid-19 pandemic, life insurers saw a muted Q1, but business has picked since, at least for the private insurers. While supply-side constraints remain, they are expected to ease out as restrictions are removed by local authorities.
Among the largest private-sector life insurers, while SBI Life insurance reported a 5.67 per cent YoY decline in NBP in July, HDFC Life saw a marginal 4 per cent YoY increase in NBP. On the other hand, ICICI Life reported a 36.31 per cent jump in NBP.
The life insurance industry has seen a huge spike in death claims in Q1FY22 due to the devastating effects of the second wave of the pandemic, resulting in companies taking a huge hit on their profitability to keep aside reserves to mitigate the impact of elevated levels of claims. While the claims burden has come down since Q1 but insurers are on tenter hooks with a probable third wave.
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