What Led To Life Insurers’ Premium Growth In May
Life insurers’ annual premium equivalent grew at 23 percent year-on-year in May compared with 8 percent a year ago.
Indian life insurers continued to witness double-digit premium growth in May on account of a lower base and increased focus on unit-linked plans.
The annual premium equivalent—sum of annualised first-year premiums on regular policies and 10 percent on single premiums—grew at 23 percent year-on-year last month compared with 8 percent in May 2018, according to data compiled by BloombergQuint from the Insurance Regulatory Development Authority of India. Premium growth of life insurers was the highest in nearly two years at 27 percent in April.
A low base and focus on Ulips, along with fewer equity investments, led to strong growth in annual premium equivalent, a measure used to calculate sales of insurers, according to a note by Kotak Institutional Equities.
Jefferies said strong equity market momentum supported savings business. Also, more preference for Ulips—schemes that give higher returns to policyholders as part of the premium money is invested in capital markets—helped private insurers to gain market share from Life Insurance Corporation of India, it said in a report.
While private insurers reported a 31 percent year-on-year growth in annual premium equivalent in May, for LIC it rose at 15 percent.
The recent run-up in the equity market and falling interest rates on other savings products, especially term deposits, made them less lucrative, according to JM Financial. That will lead to a 16 percent annualised growth for the life insurance industry over financial years 2019-2021, it said in a note.
Market Share
The private companies continued to eat into the share of India’s largest insurer.
Private insurers had a market share of 50.8 percent in May, a gain of 3.2 percent over last year. LIC’s share fell by similar proportion to 49.2 percent, the IRDA data showed.
Among the private firms, SBI Life Insurance Company, HDFC Life Insurance and ICICI Prudential Life Insurance Company held the biggest chunk of the market share.
SBICAP Securities has a pecking order of SBI Life, Max Financial, ICICI Prudential based on factors such as brand, product mix, distribution, persistency growth, profitability, innovation quotient, cost efficiency and valuation.