Insurance sector: Healthy Growth trajectory Ahead

In May 2022, the insurance sector in India picked up a new business premium for the industry grew strongly by 89% YoY on a lower base of May last year, which saw a slow growth amid Covid restrictions and lockdowns. Among the listed and other large players, SBI Life Insurance reported the fastest new business premium growth, while LIC witnessed a premium growth of 77%. After witnessing underperformance for the past two years, the insurance sector is poised to return to a healthy growth trajectory.

Max Life reported the fastest individual Annual Premium Equivalent (APE) growth which is a common sales measure of Insurance companies is of around 73% YoY, after witnessing slower growth in April. Growth for HDFC Life was at 52%, while ICICI Prudential saw individual APE growth of about 36%. Meanwhile, the individual APE growth for SBI Life Insurance surged by 194% YoY.

Insurance companies including Max Life and HDFC Life saw market share gains on a monthly basis in terms of individual APE. While ICICI Prudential lost its market share on the monthly basis, the market share of Max Life and HDFC Life increased by 57 bps and 60 bps MoM, respectively. For ICICI Prudential, the market share declined by 157 bps MoM, while LIC’s market share in individual APE increased by 269 bps MoM.

The number of policies growth was healthy for the insurers. For HDFC Life, policy growth stood at 13% YoY. While for Max Life and ICICI Prudential, the policy growth stood at 29% and 14.2% YoY, respectively, in May 2022.

After witnessing muted growth in business premiums in January and February 2022, the life insurance industry is witnessing a healthy recovery. The protection segment for life insurers is expected to continue to gain pace as supply-side issues subside and non-par and annuity segments are likely to witness strong growth. While ULIPs are expected to remain affected by volatility in capital markets. Further, after witnessing underperformance for the past two years, the insurance sector is poised to return to a healthy growth trajectory.

Factors such as a large protection gap and expanding per capita income are key long-term growth drivers for the sector. In this backdrop, strong players are expected to be armed with the right mix of products, services, and distribution and are likely to gain from this opportunity.