Private Life Insurers Continue To Seize LIC's Market Share in First Year Premiums: Report
State-run Life Insurance Corporation of India (LIC) has been the main driver of life insurance industry premium accounting for about 69% of total first year premium collected in FY19-20, with the private sector accounting for the balance 31%. However, over the past decade, private life insurance players have continued to gain market share from LIC due to various measures and regulatory changes in the insurance sector, says a research note.
 
In the report, CARE Ratings says, "The declining market share of LIC as compared to private players, is further noticeable for the month of April 2020 as well, where LIC has lost share from 53.3% in April 2019 to a sharper decline to 44.4% in April 2020. Even as LIC has gained a 0.5% share in overall first year premium for April 2020, however, private companies have gained a 7% share in sum assured as private companies have sold a larger share of protection plans which have a higher sum assured as compared to traditional plans."
 
 
According to the ratings agency, individual single and non-single premium income continues to play a major role for LIC as they contributed 50.5% of total first year individual premium income in FY19-20 compared with 61.3% in FY09-10. In comparison, the contribution of individual single and non-single premium income in total first year individual premium income during FY19-20 was 49.5% for private insurance companies as against 38.7% recorded in FY09-10, as private players focused more on individual premium products. 
 
"The rise of the private companies can be attributed to focus on metro cities, on high value insurance policies, which generated larger premiums, digital push, and expansion of multiple distribution channels like bancassurance and digital compared with LIC’s focus on the agency channel," the report says.
 
The overall life insurance industry in India recorded a first-year premium income of Rs2.6 lakh crore during FY19-20 as against Rs1.1 lakh crore during FY09-10, registering a compounded annual growth rate (CAGR) of 8.2% during FY09-10-FY19-20. While private sector insurers posted a CAGR of 7.0% growth (FY09-10- FY19-20) in their first-year premium income, LIC recorded 8.7% CAGR growth.
 
 
CARE Ratings has divided the 10-year period in two phases, first when private insurers face larger impact of regulatory changes and second in which private insurers recovered lost ground and outpaced LIC.
 
The first phase was four years between FY09-10 to FY13-14. On the basis of total individual first year premium income, the market share of LIC witnessed an increasing trend from FY09-10 to FY13-14, while private players witnessed a declining market share trend during the same period (see chart below). 
 
 
"Bulk of the decline happened during the years of major regulatory changes, which necessitated significant effort on the part of the insurers to adapt. Several products (predominantly unit linked insurance policies-ULIPs) were rendered ineligible and insurers had to re-design them to comply with the new regulations, resulting in a sharp decline in product offerings," the ratings agency says.
 
The second phase is for six years between FY13-14 to FY19-20, which can be divided in to two further phases that highlight decline in first year premium collections of LIC. Since FY13-14 to FY16-17, LIC’s individual first year premium growth was slow (CAGR of 2.2%) as compared to private players CAGR of 13.7% as there was a rise in distribution channels of private players. 
 
From FY16-17 to FY19-20, LIC’s individual first premium registered a CAGR growth of 3.0% as compared to CAGR growth of 11.9% in private players. 
 
Since FY13-14 to FY19-20, LIC’s share consistently declined from 68.5% in FY13-14 to 50.5% in FY19-20. Whereas, the market share of private insurers has increased from 31.5% in FY13-14 to 49.5% in FY19-20. 
 
The shift in individual first year premium market share from LIC to private players can be attributed to several structural and regulatory changes, CARE Ratings says, adding, "Private players underwent transformation leading to increased penetration, higher coverage, rise of multiple channels including agency, bancassurance, broking, direct and corporate agency, superior reach, and intensifying competitiveness in the market. The overall industry has also witnessed trends such as increased digital presence, emergence of InsureTech for innovations around customer education and service, products, technology and delivery systems for access."
 
LIC dominates with a three-fourth share in individual number of policies, while private players dominate with a two-third share in sum assured for individual policies.
 
 
In terms of number of policies, LIC continues to have a higher share at 75.9% in FY19-20 compared with 73.0% in FY09-10, which peaked at 84.4% in FY13-14, when compared to 24.1% share of private insurers in FY19-20. 
 
During FY19-20, life insurers issued total 288.9 lakh new individual policies, out of which LIC issued 218.9 lakh policies and private life insurers issued 69.5 lakh policies. 
 
"While the private sector achieved a CAGR growth of (-) 6.4% (FY09-10-FY19-20) in the number of new policies issued against the previous year, LIC achieved a CAGR growth of (-)5.1% (FY09-10-FY19-20). This can be attributed to insurance companies has been more in the insurance premium (value) compared to the quantum of the policies sold annually (volume)," the ratings agency says.
 
The market share of private insurers in total sum assured for individual first year premium has been improved to 67.7% in FY19-20 as compared to 61.9% in FY17-18, while LIC’s share declined to 32.4% in FY19-20 as compared to 38.1% in FY17-18.
 
"The insurance business is expected to witness muted growth in the first quarter of FY19-21 due to COVID-19 and subsequent extended lock down, however protection plans could witness an increase due to rising awareness and the online channel could see robust growth," CARE Ratings concludes.
 
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    General Insurance Council warns against agents promising claims for loss of profit
    With some insurance consultants and brokers advising their clients to lodge a claim under their Business Interruption or Loss of Profit policies with non-life insurers and also go to the court, the General Insurance Council of India has issued a public advisory against such malpractices and false promises, said a top official.
     
    Simply put, a business interruption or loss of profit policy is part of fire insurance policy to compensate the loss of profit suffered by a policy holder due to material damage to the property insured against fire and other listed perils.
     
    Owing to the Covid-19 lockdown, corporates across the country are not operating their plants and not able to earn revenue and profit.
     
    "World over a claim under the loss of profit policy will kick in only when there is a material damage to the property insured owing to insured risks and that damage is admissible," M.N. Sarma, Secretary General, General Insurance Council told IANS.
     
    He said in the case of lockdown due to Covid-19, there is no material damage to the property insured and hence policy holders cannot lodge claims.
     
    However, many non-life insurers are receiving claims under the loss of profit policies after the advice of unscrupulous insurance consultants.
     
    Industry officials also expressed fears that somewhere, someone can go to a court and get a claims settlement order.
     
    "If such a thing happens then the insurers have to provide for such claims in their books till a final order is obtained from the Supreme Court," an industry expert told IANS preferring anonymity.
     
    The General Insurance Council as a precautionary measure has advised the policy holders to get in touch with their insurers and not get carried away by the false promises of consultants/legal experts.
     
    The Council also warned the consultants that they are violating the Insurance Act and are liable to legal action.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
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    Govt Extends Motor, Health Premium Dues Payment Till 15th May
    The Union government has allowed motor and health insurance policyholders to defer payment of their renewal premium falling due during the period of the lockdown that has now been extended till 3rd May.
     
    The finance ministry in a revised notification has now allowed third party motor insurance premium dues falling during the period of national lock-down between March 25 and May 3, to be paid on or before 15th May.
     
    In the earlier notification, this relaxation was allowed for initial lock-down period from March 25 to April 14 where policyholders were asked to pay premium dues till April 21. But since the period of lock-down has been extended, premium dues can be paid after the lockdown ends.
     
    The (delayed) payment will also 'ensure continuity of the statutory motor vehicle third party insurance cover from the date on which the policy falls due for renewal,' department of financial services said in a notification dated 15th April.
     
    The government has provided the same deferred payment option to health insurance policy holders too who had to pay renewal premium during the period of the lockdown.
     
    The changes have been made in view of the prevailing situation in the country due to COVID-19 disease and consequent 19-day extension of national lock-down from April 15 to May 3, 2020.
     
    The latest changes in compliance measures for insurance customers had come after finance ministry allowed similar deferral in performance of statutory duty in respect of direct tax and indirect tax last month.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.
        
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