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First-year premium for life insurers down 27% in November

First-year premium for life insurance companies declined in November by almost 27 per cent after months of positive growth, with both private sector insurers and Life Insurance Corporation (LIC) of India registering a contraction in premiums.

Data released by IRDAI revealed that first-year premium for life insurers in November fell by 26.93 per cent to ₹19,159.30 crore from ₹26,221.24 crore in November 2019.

First-year premium for the period between April and November also contracted by 1.53 per cent to ₹1,66,662.97 crore as against ₹1,69,251.20 crore in the same period a year ago.

Covid-19 pandemic, slowdown impact life insurers

Sharper decline for LIC

The decline in first-year premium collection was sharper for LIC at 35.58 per cent in November this year to ₹12,092.66 crore compared to ₹18,770.56 crore a year ago.

For the fiscal year till November 2020, LIC registered a 3.76 per cent drop in first year premium to ₹1,15,658.74 crore versus ₹1,20,172.93 crore in the same period a year ago. The sharpest drop for LIC has been in the category of non-single premium products.

First year premium of life insurers down 0.82% in H1 of current fiscal

Meanwhile, for private sector insurance companies, first-year premium fell by 5.15 per cent to ₹7,066.64 crore in November this year as compared to ₹7,450.68 crore in November 2019.

They, however, registered a positive growth of 3.92 per cent in first-year premium for the period between April and November 2020 at ₹51,004.23 crore versus ₹49,078.27 crore in the same period last fiscal.

Hopes belied

The IRDAI data is surprising as insurers had been hopeful of better sales in the second half of the fiscal with the recovery in economy as well as investment planning by customers. Most life insurers have also highlighted the rising demand for guaranteed and protection products after Covid-19-induced uncertainties and have also been hopeful of a revival of ULIP sales with better performance of equity markets.

Analysts attributed the contraction in premium growth to a high base effect.

“Individual annual premium equivalent (APE) growth turned positive in September 2020 (up 4 per cent year on year) as the lockdown eased, and was up 14 per cent year on year in October 2020, but declined year on year in November. This may be due to a high base effect; November 2019 was a strong month for the private industry with 27 per cent growth as compared to 3-4 per cent growth in September and October 2019,” said a note by Kotak Institutional Equities, adding that this will normalise from December and in fact a low base of March 2020 (due to the sudden lockdown) will likely provide a big boost.

Individual APE for the private sector declined 7 per cent on an annual basis in November 2020, while group APE was down 12 per cent, translating to 7 per cent decline in overall APE.

Anand Rathi Research said the APE for LIC plunged 64 per cent year on year. “Toward end-2019, LIC announced the closure of a few insurance policies; hence, its sales were high in the corresponding month of 2019,” it said.

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