Business - LIC cover shrinks as pvt insurers grab majority share this fiscal

Paramita Chatterjee

NEW DELHI: Private insurers saw their market share rise to 62% during April-December 2008 from 45% in the same period last fiscal, as per data
available with the Insurance Regulatory & Development Authority (Irda). Although there has been a deceleration of growth in the life insurance sector in terms of the total annual premium equivalent (APE), private players recorded 38% growth over the previous year.

APE captures new premium paid every year. As per the insurance regulator, the total APE for private insurers during the first nine months of the current financial year stood at Rs 18,220 crore, compared to Rs 13,214 crore during the corresponding period of the previous fiscal. ICICI Prudential, Bajaj Allianz, SBI Life, Reliance Life and HDFC Standard Life are the dominant private players in the sector.

Broadly, the insurance industry recorded a marginal growth of around 3% during the period. Public sector insurer LIC, which is the market leader, recorded a decline of 28% in its APE collections this fiscal, although it recovered from the sharp drop in November and recorded a 10% growth over October 2008. Its total APE stood at Rs 11,025 crore compared to Rs 15,249 crore in the previous fiscal.

Those who track insurance premium collection said the industry has witnessed a reasonable growth despite the tight financial condition this fiscal. Max New York Life Insurance director & head (agency) Rajender Sud said, “Life insurance products are perceived as long-term investment and wealth creation tools that give a sense of security. Consumers have started valuing financial
protection more in the wake of the slowdown.”

Others expect a bigger collection in the current quarter. Bajaj Allianz zonal manager (north) and head (pension business) Sanjay Kumar Jha said, “Normally, 40-45% of our new premium collection comes in the last quarter of every fiscal, and we expect a good growth rate over the next two months. We registered 30% growth in December.”

There are 21 private players in the industry. With more players waiting to tap the market, the sector is expected to grow in a couple of years.

It is estimated that the penetration of life insurance in the country is 4% of the GDP compared to 8-10% in certain developed economies and the Asian markets. Around 24% of Indian households own life insurance policies and the average sum assured per household is just Rs 1,14,450 among the owner households.