MUMBAI: Life insurance business in India is likely to contract in 2020, with growth declining 0.9% in 2020, compared to 8.8% growth recorded in 2019, due to the outbreak of covid-19 and the subsequent lockdown, data and analytics company GlobalData said on Wednesday.
“As per the latest data, India’s life insurance market is forecasted to grow at a compound annual growth rate (CAGR) of 5.3% during the forecast period 2019-2023," said GlobalData.
The new business premium for life insurers in India shrunk for the second month in April, with business significantly hit by the covid-19 outbreak and the subsequent lockdown.
According to the Insurance Regulatory Development Authority of India or Irdai, in April, new business premium declined 32.6% to ₹6,728 crore as against ₹9,928 crore for the same period of last year.
In March, new business premium collection had declined 32% to ₹25,409 crore as compared to ₹37,459 crore in March 2019.
Pratyusha Mekala, insurance analyst at GlobalData, said, “Bancassurance and agency channels account for over 90% insurers’ new business premiums in India. Due to the lockdown restrictions, sales through these channels have been severely impaired."
The extended phase of lockdown and its related restrictions will have a negative impact on the new business premiums growth in 2020, said GlobalData.
“Premium from new business accounts for 42% of the life insurance market. As a result of lockdown, life insurers reported decline of 32.6% in new business premium in April 2020 against the same period last year," said GlobalData.
Mekala said, to offset the adverse impact of offline distribution channels, efforts are being made by insurance companies to accelerate online sales.
“For instance, Web aggregators such as Policybazaar have reported 20% growth in sales of life insurance products in March 2020. However, growth from online channels is unlikely to prevent contraction in the overall life insurance business," added Mekala.
For April, state-run Life Insurance Corp. of India (LIC) saw its new business premium dipping by 32% to ₹3,582 crore as compared to ₹5,268 crore a year ago.
Private life insurers too witnessed a whopping 33.3% fall in new business premium for April at ₹3,146 crore as against ₹4,714 crore in April 2019.
Among large private insurers, HDFC Life Insurance Co.’s new business premium dropped 53% to ₹669 crore, while ICICI Prudential Life Insurance saw it plunging by around 60% to ₹256 crore.
In its latest report, Morgan Stanley said, while it expects the first quarter ending June to be seasonally weak for insurers, the pack of recovery will be the key thing to track as the lockdown is lifted.