New Delhi: The collection of first-year premiums by life insurers has fallen by 37% to Rs5,087 crore in October, compared with September, and experts say the slide could continue.
First-year premiums in October fell some 7% in October compared with a year ago.
“The dip in collection (of premiums) indicates that companies are not selling many insurance policies. With slowdown in the economy, lapsation rates are also increasing for the industry,” said Ravi Trivedy, executive director of business advisory services of consultant KPMG India. “There can be a continuous slowdown in premium collection unless the economic situation improves. People are scared to invest. The money is not going anywhere... either it is in fixed deposits or it is lying with the banks.”
The data put out by the Insurance Regulatory and Development Authority show that between April and October, the industry has grown by less than 3%, compared with at least 6% a year earlier.
In October, the sales of Life Insurance Corp. of India (LIC), the largest insurer by premium collection, fell by 41% to Rs2,782 crore, compared with the previous month. LIC’s sales fell by 11% in the month compared with last year.
“The reduction in premium reflects the course of market conditions,” said R. Krishnamurthy, managing director, Watson Wyatt Worldwide.
SBI Life Insurance Co. Ltd, the only life insurer to achieve break-even, reported a decline of around 50% in its premium collection in October. “The company expects the first-year premium income to grow by 80% during the current fiscal. The new business premium this year would go up to Rs85 billion against Rs48 billion earned last year,” said managing director U.S. Roy.
“Policyholders are putting faith on unit-linked insurance plans as long-term investment avenue, and are generally undeterred by the erosion of fund values,” said Krishnamurthy.