Disruption in business owing to the ongoing Covid-led lockdown has impacted the premium collection of all life insurers in the month of April. According to data put out by IRDAI, new business premium for all life insurance companies have fallen by a notable 32.6 per cent YoY in April. Both private life insurers (33.2 per cent fall) and LIC (32 per cent) have seen a similar fall in their overall new business premiums.
The hit in premium collection, which was only expected, follows the 32 per cent decline in premiums in March, when the first phase of lockdown caused disruption in the last week of March. Given that in India, insurance policies are mostly sold with a ‘tax-saving’ pitch, business is usually strong in the fag end of the financial year. The pandemic outbreak has hence hit premium collection sharply in the past two months. Also, IRDAI had announced additional grace period of 30 days for premiums falling due in March and April; this has now been extended to May 31. This has possibly led to the postponement of premium payments. Group renewable premium fell by a steep 62 per cent YoY in April, after a 31 per cent fall in March.
Among the leading private players, HDFC Life saw 53 per cent fall in new business premium in April, while ICICI Pru Life witnessed an almost 60 per cent fall in premiums, led possibly by its higher share of unit-linked policies or ULIPs (impacted more due to equity market volatility).
Interestingly, for SBI Life, the overall new business premium was flat in April, even as there was a sharp 74 per cent YoY fall in individual non-single premium. Steep jump in group single premium (60 per cent) helped SBI Life post better performance at the aggregate premium level. For LIC too, while individual premiums and group single premiums took a significant hit, group non-single premium increased over three-fold in April.
Premium collections can remain subdued in May as well, owing to the continued restrictions and the preference among people to hold liquid cash. With the grace period to pay premiums now extended till the end of May, further postponement of premiums can also impact growth in May. That said, demand for protection and savings (non-ULIP) can scale up over the medium term.
Demand for protection policies (cover for life, disability, critical illness and accidental death) which has been on the rise, will continue to scale up further as awareness increases post Covid-19. Assured fixed long-term return offered by non-par savings products, could also see increased demand amid volatile equity market and falling interest rates. Also, pent-up demand in the past two months is likely to flow into the coming months as things return to normalcy.
HDFC Life has a lower share of ULIPs (28 per cent of annualised premium equivalent or APE), and a decent share of protection (12 per cent), which can aid growth. ICICI Pru Life on the other hand has a relatively higher share of ULIP (64.7 per cent), which can impact growth in the near-term, though the share of protection has increased significantly to 15 per cent over the past year. SBI Life too has a higher share of ULIP (70 per cent), though the management has been focussing on reducing the share of ULIPs and increasing the share of protection.
For LIC that ended FY20 with a 68.7 per cent market share, chunk of its products are traditional policies.