Falling premiums at LIC drag life insurers’ income down by 30%

The life insurance industry reported a 30% decline in premium income in April on a year-on-year basis, mainly due to the decrease in premium income by the state-owned Life Insurance Corporation of India (LIC). The private sector life insurance industry, on the other hand, reported an 8.55% increase in total new premium income.

According to the data released by the Life Insurance Council, the industry collected a new business premium of ₹12,565 crore in April 2023 compared with ₹17,939 crore in April 2022.

The premium income also fell 76% in April compared to March, from ₹52,081 crore to ₹12,565 crore, mainly due to a higher base in March as tax savers rushed to buy policies.

Despite April being a slow start for the industry, private life insurance companies reported a healthy growth of over 8.55% YoY, aided by a 15% increase in group single premiums and a 3% increase in individual single premiums. However, LIC saw its premium decline by 50.41% YoY due to a 23% fall in individual single premiums and a 66% fall in group single premiums.

Among the listed private players, SBI Life reported an 8% increase in total premium income, and HDFC Life reported a 3.24% increase in April, while ICICI Prudential saw its total premium income fall 17.12%. Max Life’s premium income marginally declined by 0.08%.

According to Suresh Ganapathy, analyst, Macquarie Capital, April usually forms 4-5% of full-year annualised premium equivalent (APE) numbers for ICICI Prudential Life as well as the industry, and while ICICI Prudential Life’s April 2023 APE numbers have been weak, the share of ICICI Bank channel seems to have bottomed out.

The low growth in premium income in April is partly due to the impact of the taxation change proposed in the FY24 union budget. The government withdrew the tax exemption on maturity proceeds of non-ULIP policies purchased from April 1, 2023, with an aggregate annual premium above ₹5 lakh, leading to a rise in pre-booking of high-ticket non-linked policies in March. According to some estimates, the impact of the sale of policies with more than ₹5 lakh premium could be in the range of 2-15% from this financial year.The life insurance industry is undergoing changes due to revised norms regarding tax, open architecture, and payment of commission, and is likely to see the changes play out by the second half of the financial year.