Published in Livemint.
Life Insurance companies clocked 11.36% growth in collective sum assured during financial year ending 31 March 2020, according to data published by the Insurance Regulatory and Development Authority of India (Irdai). However, new business premium tanked 32% in March 2020 to ₹25,409.30 crore compared with ₹37,459.36 crore in March 2019.
Life Insurance Corp. of India (LIC), which has the largest market share of nearly 76%, reported a dip of 31% in new premium income in March 2020 compared to the same month in the previous year. Among private insurers, Aviva Life Insurance (-80.18%), Pramerica Life (-73.1%) and Future Generali Life (-62.24%) were the worst hit.
The nationwide lockdown in the wake of the covid-19 pandemic has had huge ramifications for the life insurance sector. “March is an important month for the life insurance industry. A large number of fresh policies are sold in March before the financial year-end for tax-saving purposes. Most of the industry sale is still driven by physical interaction but starting early March, social distancing norms had begun. As a result, business activity took a hit,” said Abhishek Bondia, managing director and principal officer, SecureNow.in, an insurance broking firm.
The announcement of the new tax regime also seems to have hit the sale of new policies. Though the new regime is applicable from next year, individuals may not want to get into long-term commitments if they do not intend to avail tax deduction next year onwards, said Bondia.
Growth of new business premium of life insurers in December was up 37.5% compared to the same month in the previous year, said Naval Goel, CEO and founder, PolicyX.com, an online insurance marketplace. However, growth started decelerating in January (18%) and February (1.8%) and entered the negative territory in March. “It was a double whammy. The new tax regime as well as the pandemic have a role to play. For life insurers, most amount of business happens during the last week of March but due to the lockdown, bancassurance and agency-driven businesses took a hit. Had covid-19 not paralyzed the economy, the growth wouldn’t have fallen so drastically,” added Goel.
Covid-19, which has affected everyday lives and the overall economy, may push the purchase of new policies on the back-burner because mobilization of savings could take a hit in the near future. Bondia said with limited policyholder engagement activities due to social distancing norms, new business may continue to be low in the near future. “There is a possibility that policyholders could gravitate towards products that offer fixed returns and have a simpler product structure. Life insurance companies may have to look at such product structures aggressively,” he added.
With the country bracing for an extension of lockdown in some zones and social distancing becoming the new normal, the life insurance industry will have to adopt digital engagement activities rapidly. Bondia said this would help fill the void created by lack of physical meetings in insurer and bank branches, and other establishments of distribution.
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