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LIC dominance of India's life insurance market nears three-fourth mark

IBEF:  October 15, 2019

State-run insurance giant, Life Insurance Corporation (LIC) has further increased its dominance in India's life insurance market with a 6 per cent increase in the market share between April to September 2019. In the overall insurance market in India, LIC's share now stands at 72 per cent where several state-run life insurers are increasingly outdoing their private competitors in getting new businesses.

LIC registered the growth of 18 per cent in September 2019 as compared to last year and an impressive growth of 42 per cent in the first half of FY20, the latest data released by insurance regulators IRDAI showed.

"Recent months have seen strong new business growth for LIC taking its market share to 72%…Retail business has shown strong traction with a 22 percent growth in the first half of the fiscal, on the back of new launches in the individual single premium segment," according to a report by brokerage Jefferies. 

However, the ongoing economic slowdown seems to have finally caught up with the insurance sector. Individual Annual Premium Equivalent (APE) declined 3% in September as against the same period last year September as compared to 11-27% year on year growth in April to August 2019.

APE is a metric which is used when the sales contain both single premium and regular premium businesses. Also, APE is a measure used for comparison of life insurance revenue by normalising policy premiums into the equivalent of regular annual payments.

According to the brokerage report by Kotak Securities, "Even the high-growing HDFC Life declined after five months of consistent high growth. SBI Life and Max Life continued to moderate for the second consecutive month,". The report also said that, "Net inflows to equity mutual funds dropped sharply month-on-month as well."

During the same period, new business by life insurers grew 15 per cent in September as against last year, while registering a growth of 35 per cent between April and September, as per the sources. Against the average industry growth, private sector life insurers could only register a growth of 9 per cent in September as against last year, the data showed.

"New Business Premium (NBP) and total Annualised Premium Equivalent (APE) grew at a slower pace of 9 per cent and 4 per cent, respectively, in Sep'19 for private life insurers," as per a report by ICICI Securities. As per the brokerage, SBI Life and Bajaj Allianz were the outstanding performers of the first half of fiscal 2019 while HDFC Life registered faltering numbers in the reported period.

"HDFC Life (HDLI) reported 16 per cent and 20 per cent decline in total and individual APE which would be on account of a high base and possible decline in guaranteed savings products under declining interest rates," ICICI Security report said. "Bajaj Allianz and SBI Life were relative outperformers in September. SBI Life maintained leadership in the number of individual policies which grew 13 per cent compared to 5 per cent for private life insurers."

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.