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In a season when people tend to start looking at investments for saving on tax, the life insurance industry saw de-growth in the annualised premium equivalent (APE) in November, probably due to the high base effect after demonetisation and volatile stock markets.
According to analysts, de-growth in APE was between 1 and 3 per cent in November, compared to a year ago.
“Private sector individual APE was down 1 per cent year-on-year in November 2018, compared to 17-18 per cent growth over the past three months; notably, the growth rate had moderated in April-July 2018, but picked up in later months to once again slow down in November 2018,” said a research note by Kotak Institutional Equities.
Similarly, JM Financial said that the life insurance industry’s APE growth turned negative by 3 per cent in November 2018, compared to 24 per cent growth in November last year.
“The industry’s average premium per policy fell 4 per cent (y-o-y) to ₹25,390 in November this year, driven by the 10 per cent drop in LIC’s ticket size to ₹15,160 against ₹16,760 last year,” it said. For the private sector, too, the ticket size fell by 1 per cent but remained high at ₹51,750.
As per data from the Insurance Regulatory and Development Authority of India (IRDAI), first-year premium income across the life insurance industry fell by 12.58 per cent in November this year to ₹14,857.77 crore, compared to ₹16,994.95 crore a year ago.
Individual single premium, as well as group non-single premium, fell sharply by 59.58 per cent and 56.36 per cent in November for the industry as a whole.
The first-year premium income for LIC saw a sharp dip of 22.9 per cent in November this year at ₹9,511 crore, compared to ₹12,336.53 crore a year ago. Between April and November 2018, LIC’s first-year premium income fell by close to 8 per cent.
Private sector
But for the private sector, first-year premium income grew by a robust 14.78 per cent in November this year to ₹5,346.76 crore, against ₹4,658.42 a year ago. Industry sources said insurers are also still trying to understand the reason for the decline as typically there is higher sale towards the end of the year when people get serious about tax benefits.
“Sentiments have been positive and regulations have been supportive; so, the decline in APE can be due to reasons such as the high base effect after demonetisation, flowing back of some of the money into the informal sector from formal savings channels, more focus on protection products that have lower premiums, and lastly, higher inflows into mutual funds and SIPs,” said Vighnesh Shahane, CEO and Whole-time Director, IDBI Federal Life Insurance.
“The slowdown in retail investor appetite for capital market investments is reflecting in inflows to the sector,” said Kotak Institutional Equities.
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