The Hindu Business Line : Life insurance cos witness rise in renewal premiums in 2008-09

Mumbai, May 3 Even though investors were wary of buying new life insurance policies in the just ended fiscal, they did ensure that they did not let their old policies lapse by paying their renewal premiums on time.

While most life insurance companies saw a drop or lower growth in their new business premia, their income from renewal premia increased in the financial year 2008-09. Insurance industry officials cite wariness on part of investors to buy new policies due to the economic slowdown, as a reason for the fall in fresh business premiums. The companies focussed on improving their renewal premia, in a bid to maintain the growth in their total premium.

For the life insurance industry as a whole, renewal premiums have grown by around 35 per cent to Rs 79,165 crore for the nine-month period ended December 2008, said Mr S.B. Mathur, Secretary General, Life Insurance Council.

However, for the same period, fresh business premiums of life insurance companies registered a negative growth of 2 per cent to Rs 52,298.86 crore.

The country’s largest life insurer, Life Insurance Corporation of India’s renewal premium surged by 23.91 per cent to Rs 75, 971 crore for the 11-month period ended February 28, 2009. For the same period, LIC’s fresh business premium collections registered a negative growth of 4 per cent to Rs 43,883.24 crore.

SBI Life Insurance’s renewal premiums have almost tripled from Rs 700 crore in 2007-08 to Rs 1,800 crore in 2008-09, said Mr U.S. Roy, Managing Director and CEO, SBI Life Insurance. SBI Life Insurance company’s fresh business premiums rose 12 per cent to Rs 5,386 crore in the same period.

“We focussed on improving our renewal premiums in 2008-09 and put a particular emphasis on improving our infrastructure. All State Bank of India branches accepted renewal premiums in the just ended fiscal. The company also accepted payments through the electronic clearing service (ECS),” Mr Roy said.

Tata AIG Life Insurance saw a 51 per cent growth in renewal premiums in FY09. The company’s fresh business premiums grew 18 per cent to Rs 1,142 crore for the fiscal.

The customers have a choice to renew their life insurance policy or go for fresh investment. Based on their priorities, need and capacity to pay, the customers decide to continue to pay renewal premium instead of opting for another policy. Customers have a long term view for life insurance and continue to hold on to their policies. They are also aware of the grace period and defer the renewal premium payment, said Ms Atri Chakraborty, Vice-President, Operations, Tata AIG Life Insurance.

ICICI Prudential Life Insurance, the largest private sector player, registered a 61 per cent growth in renewal premiums to Rs 8,872 crore for the FY09 as against a 18 per cent fall in fresh business premiums to Rs 6812.52 crore in the same period.

The renewal premiums are a function of new business written in the previous year. The new business premiums had grown at a very good rate in 2007-08, said Mr Satyan Jambunathan, Senior Vice-president and Head-Finance, ICICI Prudential Life Insurance.

New business premiums had grown at around 58 per cent in 2007-08 for ICICI Prudential.