Life insurance sector maintained its growth momentum in February 2021 after witnessing a drop in the last two months of the calendar year 2020. First Year Premium of life insurers witnessed a double-digit growth of 21 per cent in the penultimate month of FY21 to Rs 22,425 crore compared to Rs 18,533 crores in February 2020. It had posted a year-on-year (y-o-y) decline of 2.8 per cent and 26.9 per cent in December and November last year. The growth continued to be driven by an expansion in single premiums however, a fall in non-single premiums restricted this increase, said a CARE Ratings report.
With monthly numbers showing a strong growth for February, the year-to-date (YTD) numbers too have returned to positive territory, reporting a much more modest rise in first year premium collection. The sector reported an increase of 0.6 per cent in first year premium to Rs 2,34,861 crore YTD from Rs 2,33,487 crore in the corresponding period last year. Furthermore, the overall sum assured declined by 7 per cent from Rs 44.4 lakh crore to Rs 41.8 lakh crore during the period, the report added.
LIC's first year premium decreased by 3 per cent in YTD February FY21 compared to growth of 37 per cent in YTD February FY20. On the other hand, private companies reported a growth of 8.5 per cent against growth of 21.4 per cent in the matching period. "Interestingly, LIC grew at a compounded annual growth rate of 15.3 per cent compared to industry's growth of 15.1 per cent and private sector growth of 14.8 per cent between YTD Feb FY19 and YTD Feb FY21," it said.
The pandemic has created a rise in the demand for protection plans, while the market volatility continued to affect the demand for linked plans. The life insurance premiums have been all over the place, with monthly premiums increasing and retreating due to the lockdown and business disruption. The industry is expected to grow in low single digits for the year as compared to a double-digit growth witnessed last year. Overall, the outlook is expected to be stable in the medium term, CARE said.