After witnessing year-on-year drop in premiums for the last four months, life insurance companies are finally in the green. New business premium (NBP) of life insurers grew 6.86 per cent in July to Rs 22,986 crore, compared to Rs 21,509 crore in the corresponding period a year ago. It was, largely driven by private insurers’ performance.
Private insurers, 23 in total, amassed NBP to the tune of Rs 7,815 crore in July, up 26 per cent from Rs 6,197 crore in the same period last year. State-owned insurance behemoth – Life Insurance Corporation – was still in the red, with 0.92 per cent drop in NBP to Rs 15,170.95 crore in July 2020, compared to Rs 15,311.87 crore.
NBP is the premium acquired from new policies for a particular year. Life insurers had seen their NBP decline 32.6 per cent and 25.4 per cent in April and May, respectively. And in June, NBP of life insurers was down 10.5 per cent.
While July saw life insurance sector’s NBP post positive growth, however, the April-July period saw premiums decline 12 per cent to Rs 72,321 crore compared to Rs 82,146.5 crore in the same period last year.
Similarly, private insurers NBP in the April-July period was down 6.44 per cent to Rs 20,620.56 crore compared to Rs 22,039.81 crore in the same period last year. LIC also followed a similar trend and witnessed a drop of 14 per cent to Rs 72,321.53 crore compared to Rs 82,146.46 crore. Experts believe that growth in the sector could potentially return in Q2 or Q3 and distribution channels could see significant realignment, with digital sales rising at the cost of individual agents and bancassurance.
Motilal Oswal Institutional Equities said, “We expect business growth to remain under pressure over the near term, especially for the savings business, given the reduced economic activity and consumption slowdown.
High volatility in the capital markets, in an uncertain environment and lower earnings visibility, should lead to tepid demand for unit-linked products. On the other hand, protection and annuity businesses are likely to do well, it added.