LIC IPO: LIC's Death Claims In Six Months Of Second Wave Higher Than Full Pre-Covid Year
The country's largest life insurer reported a 35% jump in death claims because of Covid-19.
Life Insurance Corp. paid more in death claims in six months coinciding with the deadly second wave of the Covid-19 than in an entire year pre-pandemic.
The net death claims of India's largest life insurer—with a market share of more than 60%—stood at Rs 21,325 crore in the first half of fiscal 2021-22 through September, according to its IPO filing.
That's nearly 91% of Rs 23,483-crore death payouts in the entire pandemic-marred FY21. And higher than Rs 17,342 crore paid in FY20.
Share of death claims in its total payouts—including maturity of policies, annuity, pensions and other plans—doubled during April-September over pre-pandemic levels. The six months coincided with a spike in deaths during the deadly second surge of Covid-19, overwhelming hospitals.
Reserves
To meet the costs of unprecedented death claims, LIC provided for a separate mortality reserve of Rs 23,446 crore in FY21 and Rs 74,196 crore for the six months ended September.
According to the public insurer, the reserve will have no impact on its operations and it will continue to review this mortality pool as the pandemic evolves.
The insurer, however, expects the additional deaths due to the pandemic to have a one-off effect, and that it will not have a long-term impact on the mortality rates of the insurer.
Covid-19 Impact
LIC's renewal premiums rose 8.78% over the year earlier to Rs 2.2 lakh crore in FY21, tracking the overall trend across the country mainly on an increase in premiums earned from the life participating business. This reflected "an increase in insurance awareness due to the Covid-19 pandemic".
The insurer's persistency ratio for total premiums in India also improved 200 basis points. The 13th-month persistency ratio increased from 85% in FY20 to 87% in FY21, while the 61st-month persistency ratio rose from 70% to 72%.
Its first-year premiums, however, decreased 41.24% to Rs 34,341 crore in FY21. That was led by a decline in first-year premiums earned from the group non-participating business, and a higher base from a superannuation scheme with one of the state governments.