As per the provisional data released by Life Insurance Council, the industry body for all life insurance companies, the total assets under management (AUM) of life insurers increased by 9% to Rs.16185.44bn as on March 31, 2012, as compared to Rs 14825.49bn as on March 31, 2011. The increase in AUM is despite apparent slow-down in the industry, resulting in 3% drop in the total premium to Rs 2833.15bn for FY 2011-12, as compared to Rs. 2916.05bn last year.The total new business premium collected by the industry for FY 2011-12 stood at Rs. 1136.78bn as compared to Rs.1256.18bn last year, a drop of 9.5% y-o-y. Linked new business saw a significant drop of 67% y-o-y to Rs. 174.55bn as compared to Rs.527.39bn last year. Non-Linked new business premium however showed a growth of more than 32% y-o-y to Rs. 962.24bn as on March 31, 2012, as compared to Rs.728.78bn in 2010-11.

S B Mathur, secretary-general, Life Insurance Council said: “This drop in total premium can be attributed to the change in regulatory roadmap, declining number of products and disappearance of pension business in the individual segment.”

If we consider individual pension business, which forms a major segment of the new premium for Life Insurance companies, and on which policy holders have traditionally placed trust during the accumulation stage, has fallen drastically in FY 2011-12 to meager 1.80 % of total new business premium.

New Business Premium garnered from Individual Pension policies during FY 2011-12 shrank considerably to paltry Rs 11.39bn, as compared to Rs. 192.57bn in 2010-11 and Rs. 263.89bn in 2009-10. The details of the same are as follows:-

This virtual disappearance of Pension premium and declining new business unit linked premiums had wide repercussions on the overall investment done by life companies in the Indian equity market. Net investment done by life insurers in equity markets has shown a steep decline. In FY 2011-12 the net buying by life insurers in equity stood at Rs. 269.9bn as compared to Rs. 305.65bn last year. In 2009-10 the net buying done by life insurers was  Rs. 654.11bn and during 2008-09 financial crisis, when FII’s withdrew  more than Rs.460bn from equity markets, Indian life insurers had invested more than Rs.550bn reducing volatility in the equity markets.

Monolith LIC’s share of equity investment in last few years has also shown a sharp declining trend with a drop of over 50%.  In FY 2011-12, LIC had invested Rs. 157.35bn in equities as compared to Rs.392.15bn in FY 2009-10 and Rs. 358.35bn in FY 2008-09.

In tandem with declining new business premiums, the number of individual new business policies this year too declined to 44.1bn from 48mn last year. However, life insurance industry has retained its dominant retail character, with more than 341mn in-force policies on the books of life insurers as on 31st March 2012, which is the highest number of in-force policies in the world.

Showing its strong commitment towards inclusive growth and its continuous endeavour towards financial inclusion life companies underwrote more than 1.40 cr rural policies and covered more than 13.1mn socially vulnerable lives.

In FY 2011-12 life companies paid more than Rs. 111.05bn as death claims including Rs.25bn from private life companies as compared to Rs, 102.58bn last year including Rs. 22bn from private insurers.

Despite the slowdown in the life insurance sector, life companies have exhibited increased commitment towards the Indian infrastructure sector with their total cumulative investment as on 31st March 2012 growing by 43% to Rs. 2208.66bn as compared to Rs.1545.58bn last year.