Life Insurance Premiums Continue to Slide
Data reveals a downward trend in new business premiums (NBP) for life insurance companies, dipping 12% year-on-year in February. This marks a fourth consecutive month of decline, a period that corresponds with the new surrender value guidelines enacted in October 2024. According to the Life Insurance Council, the industry’s new business premium reached Rs 29,985.58 crore in February, contrasting with Rs 33,913.18 crore a year prior.
LIC’s Significant Contribution to the Decline
The Life Insurance Corporation of India (LIC), the leading life insurer in the country, significantly contributed to this downturn. Its monthly premium experienced a notable 22% decrease, totaling Rs 15,513.95 crore. This follows a downtrend where LIC’s premium de-growth worsened in February after a 14% year-over-year decline in January, when the premium was Rs 16,292.67 crore.
During an earnings call in the third quarter, Siddhartha Mohanty, Managing Director and CEO of LIC, admitted that the new surrender value norms set by the Insurance Regulatory and Development Authority (Irdai) had influenced premium collections. This was due to the insurer overhauling its product offerings and adjusting agent commissions to manage the impact. Mohanty had expressed expectations of improved collections in the fourth quarter.
Impact of New Surrender Value Norms
The Irdai’s new surrender value norms dictate that insurers must provide a larger payout to policyholders who withdraw before their policies mature. Additionally, the guidelines now allow surrender value eligibility for policies surrendered within a year, a change from the prior two-year threshold.
Response by Insurers
To mitigate the impact of these new rules, life insurers are adopting various strategies. These include reducing first-year commissions on new policies and reclaiming agent commissions if policies are surrendered within the initial two years.
Private Sector Trends
In contrast, the private life insurance sector showed a more modest growth. These companies posted a 3% year-on-year increase in new business premium, reaching Rs 14,471.62 crore in February. Among them, HDFC Life Insurance saw a considerable 24% rise in NBP, reaching Rs 3,213.76 crore, while SBI Life Insurance recorded an 18% decline to Rs 2,174.53 crore. ICICI Prudential Life Insurance experienced a 5% growth to Rs 1,857.05 crore, with Bajaj Allianz Life Insurance reporting a 3% increase to Rs 1,080.33 crore.
In terms of policy sales, the industry collectively sold 1.9 million policies during the month, a reduction from the 2.2 million sold during the same period last year.
