ICRA has released its study on the Life Insurance Sector in the country. This paper analyses the performance of 16 Life Insurance Companies (comprising LIC and fifteen companies from the Private Sector) collectively representing around 97% of the Industry-wide new business premium in FY2018.
After a healthy growth in total new business premium collections of 22% YoY during FY2017, overall industry growth continued, albeit at a slower pace, in FY2018 at 10% YoY to Rs. 1,938 billion. Private players total NBP had increased at a faster rate by 17% YoY to Rs. 593 billion, while LIC had recorded a slowdown in growth at 8% to Rs. 1,345 billion. In terms of Annualised Premium Equivalent (APE), industry growth stood at 12% YoY in FY2018 with private players growing faster at 17% YoY, compared to a 8% YoY growth rate for LIC.
Industry growth in the single premium segment had slowed down to 10% YoY in FY2018 to Rs. 1,269 billion. ICRA notes that FY2017 single premium growth was also driven by strong inflows in the de-monetization period. Regular premium growth has exceeded single premium growth for the first time in last eight years at 13% YoY in FY2018 to Rs. 669 billion. Private players have continue to drive the regular premium growth rate at 17% YoY in FY2018 (compared to 7% growth for LIC in FY2018).
Karthik Srinivasan, Group Head Financial Sector Ratings, ICRA Ltd said: “The favourable capital market outlook coupled with the steady push by the Government and the insurance companies to improve the penetrations, we believe that the new business premiums growth to be slightly higher than the nominal GDP growth rate and expects the new business premium to grow by 12% in FY2019”.
Despite the leveraging of technology for the policy issuance and servicing process, the cost structure across the industry has gradually increased in the last couple of years. This increase in expenses is partly on account higher employee expenses and administrative expenses. A lot of the companies are increasing their support staff head-count anticipating a growth in protection products. In 9MFY2018, operating costs (as a %age of Gross Written Premium) increased by ~17bps over FY2017 levels.
