In its report on Banking and Financial Services, ICICI Direct said that as Q3 and Q4 remain business accretive for the life insurance sector, and they estimate premium growth at 8-10% for FY21E, post factoring in the 5-10% decline due to lockdown.
New business premiums for the life insurance industry remain under pressure in the current financial year due to the novel coronavirus. However, ICICI Direct estimates the premium growth at 8-10% for FY21E as revival continues to remain strong across players.
In its report on Banking and Financial Services, ICICI Direct said that as Q3 and Q4 remain business accretive for the life insurance sector, and they estimate premium growth at 8-10% for FY21E, post factoring in the 5-10% decline due to lockdown. “Given the low interest rate environment, competitiveness of life insurance industry has improved thereby supporting growth in guaranteed products,” said the report.
he Covid-19 led lockdown marred the premium growth for the life insurance sector as annualised premium equivalent (APE) also witnessed a decline in the initial months. However, gradual unlocking of the economy in phases has led to a healthy revival in premium growth. Subsequently, premium accretion in August 2020 was at Rs 27,040 crore, up 14.8% year-on-year, compared to de-growth in April and May 2020.
“In terms of premium break-up as on August 2020, individual premiums witnessed regressive growth with individual single premium declining 9.7%. On the other hand, growth in group single premium remained strong at Rs 14,590 crore, up 46.6% year-on-year. Private insurers premium growth decelerated to 13.7% year-on-year in August 2020 (against 26.1% in July 2020) to come in at Rs 7,326 crore while the Life Insurance Corporation (LIC’s) premium growth was strong at Rs 19,714 crore, up 15.2% year-on-year,” said the report.
Incremental accretion seen in single premium products, especially group single premium across LIC as well as private insurers, has led to growth in overall premium but kept APE traction slower.
In July 2020, APE for the sector remained in negative territory at 33.8% year-on-year (Rs 7,626 crore). A gradual pick-up in the economy has led to a revival in APE at 2.2% YoY in August 2020. APE is the sum of annualized first year regular premiums and 10% weighted single premiums and single premium top-ups.