Taking stock of the insurance sector

By Deepak Yohannan
November 26, 2013

(Any opinions expressed here are those of the author and not of Thomson Reuters)

With half the financial year gone by, it’s time to take stock of the insurance sector. Let me start with life insurance.

It was a tough year as new norms for a majority of insurance products – which were to be effective Oct. 1, 2013 but later postponed to Jan. 1, 2014 – were hanging like a sword over the business.

The new rules are meant to make policies friendlier for customers and it would have been a disaster if consumers had delayed purchasing policies till the new regulations kicked in. But fortunately, it has not played out too badly for the industry.

To be sure, some companies have taken major hits, but quite a few others have done better compared to last year, led by a stellar performance from Life Insurance Corporation of India (LIC).

The challenges faced by the industry can be gauged from the fact that LIC, Kotak Life Insurance and Max Life Insurance (If you keep out new entrants) are the only three companies that have shown growth in the individual and group businesses in both the Single and Non-single Premium categories.

Overall, the industry grew by 7 percent in the first six months of the year as compared to the previous year, and LIC continues its dominance with 75 percent of market share.

Premium collected by the top 10 companies for the first half of 2013 are as follows:

Company

Upto Sep 2013

Upto Sep 2012

Growth

LIC

                37,906

                35,342

7%

SBI Life

                  1,727

                  1,885

-8%

ICICI Prudential

                  1,625

                  2,030

-20%

HDFC Standard

                  1,590

                  1,567

1%

Bajaj Allianz

                  1,095

                  1,135

-4%

Reliance Life

                  1,022

                      570

79%

Max LIFE

                      903

                      810

11%

IndiaFirst

                      873

                      200

336%

Birla Sunlife

                      658

                      681

-3%

Kotak Mahindra Old Mutual

                      528

                      363

46%

Source: IRDA; Values in Crores

It must be noted that a large part of growth in both LIC and private players have come from Group Single Premium products. So, the retail portfolio did take a hit as predicted.

The second half of the year holds its own challenges – retraining the entire distribution network on new products and features will not be easy as the task force is large and the new rules become operational during the peak sales season.

However, the new norms being largely in favour of the consumer should help in the sale of new policies. The financial impact on the companies might be a different story.

The general insurance business looks much rosier by comparison. The industry saw an overall growth of 14.25 percent in the first half of the year – an impressive figure given the overall state of the economy.

The four PSUs collectively corner close to 55 percent of market share and are also the top four general insurance companies by premium collected.

The industry collected 38,718 crore rupees as premium, with the largest private sector player ICICI Lombard collecting 3,404 crore rupees.

The top 10 companies by premium collected are shown below:

Apart from Royal Sundaram, all the general insurance companies have shown growth during this period, which is quite a remarkable achievement.

The second half of the year will be keenly watched in the life insurance space. With the new guidelines kicking in on Jan. 1, 2014, companies will be in a hurry to launch revised versions of their products, train their staff and gear up for the last quarter to go in for the kill during the tax saving season. If Q3 goes well, prospects for Q4 are bright. So let’s keep our fingers crossed.

(For more articles by Deepak Yohannan, visit MyInsuranceClub.com or tweet him @dyohannan)

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