Money & Banking

Life insurers’ profits to be muted, says Goldman Sachs report

Our Bureau Mumbai | Updated on February 13, 2013 Published on February 13, 2013

The profitability of the life insurance industry will be muted going forward, according to a Goldman Sachs report. The industry recorded high profits in 2011-12.

“Slower volume growth, lower cost ratios, high surrender/lapse fees have been supporting profit growth for companies.

However, insurers will now have to focus on efficiency and productivity levels as the share of surrender charges and lapse charges in overall profit will fall as the old policies (sold prior to September 2010) on which charges were high will run off,” said Goldman Sachs in the report.

The life insurance industry reported a net profit of Rs 5,974 crore in 2011-12, against Rs 2,657 crore in 2010-11 and a combined loss of Rs 989 crore in 2009-10. In the life insurance industry, 14 of the 24 companies — reported profits in 2011-2012. Life Insurance Corporation (LIC), the country’s largest insurer, witnessed a modest profit growth of 12 per cent.

In September 2010, the insurance regulator revamped unit-linked insurance plans, and capped the surrender charges which were very high in policies issued earlier.

Life insurance companies in the private sector saw a revival in premium income numbers in October 2012, with retail annualised premium equivalent increasing by 13.4 per cent while LIC’s declined by 11.9 per cent.

“Most of the growth is still being driven by traditional policies.

“However, sustained revival in the equity market could lead to a reversing trend in ULIP sales,” said the report.

The report estimates 7-20 per cent growth in premium income for the life insurance industry in FY 2013-14.


Published on February 13, 2013
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