After witnessing a slowdown in premium incomes in the first quarter of the current financial year, insurance companies registered a pick up in insurance premiums in August 2020. It is expected that the sector will return to growth phase in the second quarter of the current financial year. “The life insurance business has witnessed a fall in Q1FY21 due to the lockdown and business disruption. However growth seems to be returning in Q2FY21,” a CARE Ratings report said on Thursday, adding that the outlook for the sector is likely to be stable in the medium term and the industry could return to growth in the second or third quarter of FY21.
While LIC continued to dominate the space, it is ceding ground to private players in individual premiums. Further, this August saw a rise in first-year premium of life insurers, which grew by 14.8% to Rs 27,039.8 crore from Rs 23,554.9 crore in August 2019, which was driven by group insurance premium growth.
However, when compared on a yearly basis, there has been a fall in first year premium collection. “The life insurance sector continues to report a drop in their first year premium collection as businesses have been severely impacted by the Covid-19 pandemic,” the report said. In total, there has been a 6% drop in first year premium collection in August 2020, as compared to the same month last year.
LIC, which is the single-largest insurer in the country, also reported a 7.5% drop in first year premiums in August on a yearly basis. On the other hand, it had reported a 46.5% year-to-date increase in August last year. Private companies also reported a nosedive from last year’s 24.4% growth to this year’s negative figure of 1.9% in August.
Meanwhile, companies are ramping up their digital and online distribution channels and are likely to incur significant investment costs. They are “boosting underwriting capacities including automated/ AI based underwriting while maintaining a focus on cost improvement to sustain margins,” the report said.