Life insurance new business story for April 2023 below expectations

17 May 2023 , 09:32 AM

This is despite the private sector insurers managed an 8.6% growth; a story similar to March when LIC had pulled down the insurance numbers. In April 2023, like in March, the sharp fall in LIC NBP has led to a fall in the overall life insurance NBP too. The cumulative figure for FY24 is not too relevant since April is the first month of the new fiscal year.

Here is the macro life insurance picture for April 2023

New business premium (NBP) for life insurance as a whole fell by -29.96% in April 2023, led by a -50.41% fall in NBP for LIC. This is surprising, since April sees a lot of rush for life insurance policies as the salaried persons plan their taxes. One possibility being debated is whether the new tax regime could have dampened the demand for long-term life insurance commitment. That is the only factor that could explain the tepid performance by LIC in March and April, since much of its feet-on-street is attuned to selling year end tax planning LIC policies. Incidentally, the new tax regime (NTR), which will be the default tax regime from FY24 onwards. That does away with most Section 80C exemptions, which takes away the allure of life insurers to individuals. In fact, it is not jus the NBP but even the number of policies sold were down -9.7% overall in April 2023 and that appears to be driven by the New Tax Regime impact.

What we read from the NBP tabulation for April 2023

We look at the new business premium (NBP) collections for the month of April 2023.

PREMIUM COLLECTIONS (RS CR)	Apr-23	Apr-22	YOY Growth	FY2024 (1 month)	FY2023 (1 month)	YOY Growth
PRIVATE SECTOR INSURERS
Individual Single Premium	1,031.21	999.64	3.16%	1,031.21	999.64	3.16%
Individual Non Single Premium	2,776.15	2,816.09	-1.42%	2,776.15	2,816.09	-1.42%
Group Single Premium	2,276.61	1,980.22	14.97%	2,276.61	1,980.22	14.97%
Group Non Single Premium	5.44	10.98	-50.46%	5.44	10.98	-50.47%
Group Yearly Renewable Premium	665.81	415.99	60.05%	665.81	415.99	60.05%
PRIVATE INSURERS TOTAL	6,755.21	6,222.91	8.55%	6,755.21	6,222.91	8.55%
LIC OF INDIA
Individual Single Premium	1,014.47	1,318.73	-23.07%	1,014.47	1,318.73	-23.07%
Individual Non Single Premium	1,522.55	1,572.94	-3.20%	1,522.55	1,572.94	-3.20%
Group Single Premium	2,899.63	8,467.44	-65.76%	2,899.63	8,467.44	-65.76%
Group Non Single Premium	340.09	315.51	7.79%	340.09	315.51	7.79%
Group Yearly Renewable Premium	33.36	42.08	-20.72%	33.36	42.08	-20.73%
LIC TOTAL	5,810.10	11,716.70	-50.41%	5,810.10	11,716.70	-50.41%
LIFE INSURANCE INDUSTRY
Individual Single Premium	2,045.67	2,318.38	-11.76%	2,045.67	2,318.38	-11.76%
Individual Non Single Premium	4,298.70	4,389.03	-2.06%	4,298.70	4,389.03	-2.06%
Group Single Premium	5,176.23	10,447.65	-50.46%	5,176.23	10,447.65	-50.46%
Group Non Single Premium	345.52	326.48	5.83%	345.52	326.48	5.83%
Group Yearly Renewable Premium	699.17	458.08	52.63%	699.17	458.08	52.63%
GRAND TOTAL	12,565.31	17,939.62	-29.96%	12,565.31	17,939.62	-29.96%

Data Source: Life Insurance Council, IRDAI

Here are some of the key takeaways from the NBP numbers for April 2023.

1. For April 2023, new business premiums (NBP) of LIC contracted by -50.41% even as the NBP of private life insurers expanded by 8.55%. The overall premiums for the life insurance sector contracted -29.96%.

    

2. As discussed earlier, the sharp fall in LIC numbers can be attributed to the new tax regime that goes effective from FY24. The new tax regime has been made more attractive and also the default tax regime for individual tax filers. This has largely dampened the use of LIC as a key instrument of saving tax under Section 80C.

    

3. If one looks at the April 2023 data for LIC, there was contraction in NBP in 4 out of the 5 categories. In fact, the Group Non-Single Premium category was the only one to evince positive growth with all others contracting. LIC is normally strong in the group premium segment, so this is a reversal if sorts. Private insurers saw expansion in 3 out of the 5 categories of insurance policies. Individual non-single premium NBP fell marginally while the Group non-single premium fell sharply by over -50% in April 2023.

    

4. If we look at the overall picture of NBP for the insurance sector in India for April 2023, again 3 of the 5 segments have seen contraction. The overall insurance segment saw higher NBP from Group non-single premium and group yearly renewable premium policies.

    

5. Let us finally look at premium share. For the month of April 2023, out of the total life insurance NBP of Rs17,940 crore, LIC accounted for Rs11,717 crore (65%) and private life insurers accounted for Rs6,223 crore (35%). The reason LIC premium collections still dominate is due to the high focus that private insurers have on the term plans. 

Like in March, even April 2023 has shown considerable pressure on the new business premium (NBP) LIC. In the first month of the fiscal, LIC has maintained its share of NBP at 65%, which is higher than the average clocked during the previous fiscal year 2023. For now, the New Tax Regime appears to be dampening sentiments. Incidentally, LIC has completed 1 year of listing and it is still 40% below its issue price. These numbers would hardly be able to change the opinion of analysts and traders on the LIC stock.

 

How many policies did life insurers sell in April 2023?

Having seen new business premium (NBP) collections for April 2023, let us turn to the number of policies sold. That is normally a better picture of retail spread. We will also look at the number of policies sold by LIC and the private insurers separately.

NUMBER OF POLICIES SOLD	Apr-23	Apr-22	YOY Growth	FY2024 (1 month)	FY2023 (1 month)	YOY Growth
PRIVATE SECTOR INSURERS
Individual Single Premium	16,426	16,899	-2.80%	16,426	16,899	-2.80%
Individual Non Single Premium	3,91,334	3,90,731	0.15%	3,91,334	3,90,731	0.15%
Group Single Premium	83	62	33.87%	83	62	33.87%
Group Non Single Premium	9	16	-43.75%	9	16	-43.75%
Group Yearly Renewable Premium	525	249	110.84%	525	249	110.84%
PRIVATE INSURERS TOTAL	4,08,377	4,07,957	0.10%	4,08,377	4,07,957	0.10%
LIC OF INDIA
Individual Single Premium	37,352	50,115	-25.47%	37,352	50,115	-25.47%
Individual Non Single Premium	7,46,157	8,61,895	-13.43%	7,46,157	8,61,895	-13.43%
Group Single Premium	13	31	-58.06%	13	31	-58.06%
Group Non Single Premium	251	255	-1.57%	251	255	-1.57%
Group Yearly Renewable Premium	923	845	9.23%	923	845	9.23%
LIC TOTAL	7,84,696	9,13,141	-14.07%	7,84,696	9,13,141	-14.07%
LIFE INSURANCE INDUSTRY IN INDIA
Individual Single Premium	53,778	67,014	-19.75%	53,778	67,014	-19.75%
Individual Non Single Premium	11,37,491	12,52,626	-9.19%	11,37,491	12,52,626	-9.19%
Group Single Premium	96	93	3.23%	96	93	3.23%
Group Non Single Premium	260	271	-4.06%	260	271	-4.06%
Group Yearly Renewable Premium	1,448	1,094	32.36%	1,448	1,094	32.36%
GRAND TOTAL	11,93,073	13,21,098	-9.69%	11,93,073	13,21,098	-9.69%

Data Source: IRDAI

Here are some key takeaways from the new policy sales numbers for April 2023. Like in the last 2 months, even in April 2023, it is LIC that has seen a contraction in new policies issued in the month, while number of policies issued by private insurers has been flat. For April 2023, new policies issued contracted by -9.69% to 11.93 lakh policies overall. Out of that LIC saw -14.1% contraction in policies while private sector insurers saw life policy growth absolutely flat at 0.10% in April 2023.

To sum up the story of April 2023, LIC has a lot of brainstorming to do on NBP and on policies sold. Overall, LIC has seen a contraction of retail volumes and that could be blamed on the New Tax Regime. It does leave LIC with a big challenge to overcome.