After hitting a rough patch in Q1 of the FY 2021, the life insurance segment in India is expected to rebound in Q2. Sharp declines have been observed in the overall premium collections during Q1 FY21, and the revival is expected by most insurers during Q2 FY21. Though companies are now familiarising themselves with the new normal, the traction in retail Annual Premium Equivalents (APE) still remains weak. With a decline in demand for unit linked insurance plans (ULIPs), a decline in the share of private life insurance companies is expected in Q2 of FY21. The overall insurance segment is expected to normalise towards Q4 of FY 21 as per a report by Emkay Global Financial Services.
The Emkay Global report states that life insurance firms such as SBI Life and Max Life could surprise positively, while HDFC Life may see some deterioration. An analysis of the monthly insurance data by Emkay Global suggests relatively better growth momentum for SBI Life and Max Life, mainly supported by group insurance policies, whereas HDFC Life is expected to struggle on the growth front throughout the quarter.
As per a report by the firm Motilal Oswal private players individual Weighted Received Premium (WRP) in the life insurance segment is back to normal with a 4.4 per cent year-over-year growth posted in September 2020. For LIC, there was a growth of 5 per cent YoY, and its market share increased to 44 per cent in the first half of FY21. The report observes that the life insurance industry also posted a growth of 4.1 per cent YoY verses 2.3 per cent YoY in August 2020. The overall life insurance industry, which has reported decline since the COVID-19 outbreak, has thus reverted to the positive trajectory for the first time since January 2020.
The Motilal Oswal report further points out that HDFC Life reported robust growth of 43 per cent YoY, followed by Max Life with 16 per cent whereas SBI Life posted 4 per cent decline. The report highlights that on the other hand, mid-sized players reported healthy trends with Birla Sun Life, Tata AIA, Bajaj Allianz reporting YoY growth. Only Kotak Life saw a decline of 6 per cent YoY. LIC, however, continued to report a positive trend with a growth of 4.8 per cent YoY in individual WRP versus 2.1 per cent YoY in August 2020. Private players individual WRP market share expanded to 63 per cent for September 2020 in contrast to 57 per cent as of the first half of FY21.
The report further states that in the first half FY21, SBI Life with 11.7 per cent remained the largest private insurer in terms of individual WRP, followed by HDFC Life 9.9 per cent and ICICI Prudential Life Insurance 6.6 per cent. On an unweighted basis SBI Life was the largest private insurer with a market share of 7.2 per cent, followed by HDFC Life with 6.9 per cent and ICICI Prudential Life with 3.6 per cent.
It needs to be observed that the business volumes of all the life insurance players in India were hit in Q1 of FY21 on account of the lockdown impact leading to reported declines in their total APE since March 2020. It has also been observed that the COVID-19 pandemic has pushed the importance of life insurance as a risk cover rather than a savings linked investment product and due to that there has been an increase in demand for protection from life insurers and is expected to gain momentum in the coming months. Protection products from life insurers has also gained in further momentum as they are simple products rather than market linked products and can be comfortably bought digitally. Such products also have an advantage of being compared and bought through digital channels, especially in a world with social distancing norms.
This trend is expected to further drive the margin expansion of many of the life insurance players. It is expected that insurers may gain in market expansion through term-linked insurance products by increasing the pricing of such products and also by launching new products to neutralize the impact of the re-insurance hike.
