Personal Life Insurers Proceed to Seize LIC’s Market Share in First Yr Premiums: Report
State-run Life Insurance coverage Company of India (LIC) has been the principle driver of life insurance coverage trade premium accounting for about 69% of complete first 12 months premium collected in FY20, with the non-public sector accounting for the steadiness 31%. Nonetheless, over the previous decade, non-public life insurance coverage gamers have continued to realize market share from LIC because of varied measures and regulatory adjustments within the insurance coverage sector, says a analysis observe.
Within the report, CARE Scores says, “The declining market share of LIC as in comparison with non-public gamers, is additional noticeable for the month of April 2020 as effectively, the place LIC has misplaced share from 53.3% in April 2019 to a sharper decline to 44.4% in April 2020. Whilst LIC has gained a 0.5% share in general first 12 months premium for April 2020, nonetheless, non-public firms have gained a 7% share in sum assured as non-public firms have bought a bigger share of safety plans which have the next sum assured as in comparison with conventional plans.”
In keeping with the scores company, particular person single and non-single premium revenue continues to play a serious function for LIC as they contributed 50.5% of complete first 12 months particular person premium revenue in FY20 in contrast with 61.3% in FY10. As compared, the contribution of particular person single and non-single premium revenue in complete first 12 months particular person premium revenue throughout FY20 was 49.5% for personal insurance coverage firms as in opposition to 38.7% recorded in FY10, as non-public gamers targeted extra on particular person premium merchandise.
“The rise of the non-public firms might be attributed to concentrate on metro cities, on excessive value insurance coverage insurance policies, which generated bigger premiums, digital push, and growth of a number of distribution channels like bancassurance and digital in contrast with LIC’s concentrate on the company channel,” the report says.
The general life insurance coverage trade in India recorded a first-year premium revenue of Rs2.6 lakh crore throughout FY20 as in opposition to Rs1.1 lakh crore throughout FY10, registering a compounded annual development price (CAGR) of 8.2% throughout FY10-FY20. Whereas non-public sector insurers posted a CAGR of seven.0% development (FY10- FY20) of their first-year premium revenue, LIC recorded 8.7% CAGR development.
CARE Scores has divided the 10-year interval in two phases, first when non-public insurers face bigger influence of regulatory adjustments and second by which non-public insurers recovered misplaced floor and outpaced LIC.
The primary section was 4 years between FY10 to FY14. On the premise of complete particular person first 12 months premium revenue, the market share of LIC witnessed an rising pattern from FY10 to FY14, whereas non-public gamers witnessed a declining market share pattern throughout the identical interval (see chart beneath).
“Bulk of the decline occurred throughout the years of main regulatory adjustments, which necessitated important effort on the a part of the insurers to adapt. A number of merchandise (predominantly unit linked insurance coverage policies-ULIPs) have been rendered ineligible and insurers needed to re-design them to adjust to the brand new rules, leading to a pointy decline in product choices,” the scores company says.
The second section is for six years between FY14 to FY20, which might be divided in to 2 additional phases that spotlight decline in first 12 months premium collections of LIC. Since FY14 to FY17, LIC’s particular person first 12 months premium development was gradual (CAGR of two.2%) as in comparison with non-public gamers CAGR of 13.7% as there was an increase in distribution channels of personal gamers.
From FY17 to FY20, LIC’s particular person first premium registered a CAGR development of three.0% as in comparison with CAGR development of 11.9% in non-public gamers.
Since FY14 to FY20, LIC’s share persistently declined from 68.5% in FY14 to 50.5% in FY20. Whereas, the market share of personal insurers has elevated from 31.5% in FY14 to 49.5% in FY20.
The shift in particular person first 12 months premium market share from LIC to non-public gamers might be
attributed to a number of structural and regulatory adjustments, CARE Scores says, including, “Personal gamers underwent transformation resulting in elevated penetration, larger protection, rise of a number of channels together with company, bancassurance, broking, direct and company company, superior attain, and intensifying competitiveness out there. The general trade has additionally witnessed tendencies corresponding to elevated digital presence, emergence of InsureTech for improvements round buyer schooling and repair, merchandise, expertise and supply techniques for entry.”
LIC dominates with a three-fourth share in particular person variety of insurance policies, whereas non-public gamers dominate with a two-third share in sum assured for particular person insurance policies.
When it comes to variety of insurance policies, LIC continues to have the next share at 75.9% in FY20 in contrast with 73.0% in FY10, which peaked at 84.4% in FY14, when in comparison with 24.1% share of personal insurers in FY20.
Throughout FY20, life insurers issued complete 288.9 lakh new particular person insurance policies, out of which LIC issued 218.9 lakh insurance policies and personal life insurers issued 69.5 lakh insurance policies.
“Whereas the non-public sector achieved a CAGR development of (-) 6.4% (FY10-FY20) within the variety of new insurance policies issued in opposition to the earlier 12 months, LIC achieved a CAGR development of (-)5.1% (FY10-FY20). This may be attributed to insurance coverage firms has been extra within the insurance coverage premium (value) in comparison with the quantum of the insurance policies bought yearly (quantity),” the scores company says.
The market share of personal insurers in complete sum assured for particular person first 12 months premium has been improved to 67.7% in FY20 as in comparison with 61.9% in FY18, whereas LIC’s share declined to 32.4% in FY20 as in comparison with 38.1% in FY18.
“The insurance coverage enterprise is predicted to witness muted development within the first quarter of FY21 because of COVID-19 and subsequent prolonged lock down, nonetheless safety plans may witness a rise because of rising consciousness and the web channel may see sturdy development,” CARE Scores concludes.