The new business premiums of life insurance companies declined 32 per cent in the month of March, owing to the disruption caused by the spread of coronavirus (Covid-19) and the subsequent lockdown enforced by the government to contain its spread.
For the month of March, the new business premiums of life insurance companies stood at Rs 25,409 crore compared to Rs 37,459 core in March 2019. The private life insurers, 23 in total, saw their new business premiums decline by 34.21 per cent in March 2020 at Rs 8,342 crore compared to Rs 12,682 crore in the same period of the last financial year.
Similarly, state-owned life insurance behemoth – Life Insurance Corporation (LIC) – saw its premiums decline by 31.11 per cent in the reporting month. In March 2020, it collected new business premiums to the tune of Rs 17,066 crore compared to Rs 24,776 crore in March 2019.
However, for the entire fiscal year (FY20), life insurers saw new business premium grow 20.6 per cent to Rs 2.58 trillion compared to Rs 2.14 trillion in FY19. LIC outpaced the private insurers in new business premium growth in FY20. LIC’s premium grew 25.17 per cent to Rs 1.77 trillion while private insurers reported an 11.64% per cent growth to Rs 80,919 crore.
The last quarter is very significant for life insurers as they sell a lot of products during this time, especially the last month of the fiscal year. But with the lockdown, the business of life insurers got impacted severely.
Experts have said that in the near term, with extension in lockdown, social distancing norms in place, the new business of life insurers will take a hit.
The life insurers are changing their strategy and moving more towards the online distribution model. But so far, digital channel contributes 3-4 per cent of the business.
However, the insurers are hopeful that this pandemic will nudge policyholders to buy more protection products in the future.
Analysts have said, life insurers will gain in the long term with increased demand for protection products because of this pandemic and also because of the new tax regime that lowers the attractiveness of life insurance as an investment product.