Life Insurance Corporation of India’s new business premium (first year premium) that grew a robust 40 per cent year-on-year (y-o-y) for the nine months ended December 2016 has been due to the sharp jump in its single premium policies during the current fiscal.

In the month of November (post demonetisation) in particular, there was a 142 per cent jump in the insurer’s new business premium, with single premium (group and individual) trebling from the year-ago period.

The robust sales of LIC’s immediate annuity plan — Jeevan Akshay — was the key reason for the sharp jump in the company’s premium in November, according to sources in LIC.

Under the immediate annuity plans, one pays a lumpsum amount to the insurer upfront and the insurer, in turn, promises a regular income stream for the rest of the policyholder’s life. With the company announcing reduction in yield in Jeevan Akshay from December 1, customers queued up to buy the policy.

In January, new business premium growth slipped to 30 per cent over the previous year, with single premium growing 40 per cent y-o-y.

Falling rates

While demonetisation and fall in rates triggered LIC’s November sales, the company’s growth until October was also driven by single premium policies.

As returns from annuity plans vary with market rates in the economy, investors appear to have locked into higher rates towards the beginning of the fiscal.

For the half year ended September 2016, LIC’s new business premium grew 41 per cent y-o-y, with individual single premium doubling over the previous year. In October, too, there was robust growth in the insurer’s individual single premium business (almost trebling over the previous year). But sluggish performance in other products led to a 5 per cent decline in its overall new business premium.

Now, with rates having fallen sharply, sale of annuity policies may slow down, according to sources in the company. Growth in the overall new business premium could in turn get impacted.

In December, individual single premium grew just 2.6 per cent y-o-y (after 616 per cent growth in November). January saw 18 per cent jump in such premiums.

Catching up

While LIC has a strong portfolio of traditional policies that has been driving its growth, few private sector players have gained significant market share in the past year, driven by healthy demand for their unit-linked products (ULIPs).

SBI Life’s new business premium has grown a robust 55 per cent y-o-y until January 2017, above the industry growth of 35 per cent, according to IRDA data.

The private insurer’s market share has gone up by nearly four percentage points over the past year. SBI Life has a balanced mix of traditional policies and ULIPs.

HDFC Life, too, saw a healthy growth of 38 per cent (until January) gaining over one percentage point in market share. HDFC Life has a higher proportion of ULIPs. But ICICI Pru Life, which also has a higher ULIP portfolio, lost close to two percentage points market share with its new business premium (first year premium) growing 13 per cent until January.

Related Topics
comment COMMENT NOW