The life insurance industry is expected to see a flat growth in annual premium equivalent in the ongoing fiscal.
The industry was affected by a staggered lockdown disrupting the physical sales channel, weakness in the capital markets, focus on cash conservation and moderation in the protection business along with the pressure of a premium hike dampening the pace of recovery.
The annual premium equivalent (APE) refers to 100 per cent regular premium and 10 per cent of the single premium collected by an insurer in a given period. It is used to normalise single-premium payments and recurring premium payment to accurately compare sales.
On an APE basis, the industry saw a decline of 9 per cent for a five-month period ending August 2020 and 7 per cent decline at the end of September 2020. Individual new business premium at Rs 46,839 crore saw a modest 1 per cent growth on a year-on-year basis as of September 2020.
“We expect the full-year industry growth to be flattish or slightly positive,” said G. Murlidhar, managing director and chief executive officer of Kotak Life Insurance.
Growth drivers
The industry, however, is bullish on the growth prospects with protection plans and annuities to act as the two main drivers on the product side. The industry anticipates a 15 per cent compounded annual growth rate in insurance premium over the next 5 years. According to Kotak Life Insurance, the key factors driving this are increasing customer awareness, preference for transactions through digital platforms, favourable demography and an under-penetrated market.
Protection plans are expected to grow at a CAGR of 23-25 per cent, while annuities are expected to grow at over 20 per cent. “In both the segments, the growth rate would be faster than the industry average,” said Murlidhar.
“We expect the industry growth momentum to continue in 2021 with people becoming cognizant of the need for insurance. From a product perspective, while term and health plans saw an uptick, we will have to see how the next few months pan out with respect to the new strain of the virus and vaccine. If the news stays positive, I am sure market linked products would also come back in a big way,” said Tarun Chugh, MD and CEO of Bajaj Allianz Life.
