Life insurance companies in India recorded a 13.16% year-on-year (Y-o-Y) growth in new business premium (NBP) in October, totaling Rs 30,347 crore, as reported by the Life Insurance Council. This increase in NBP occurred despite a significant decline in the number of policies sold, reflecting both the impact of regulatory changes and the strong performance of private sector insurers.
State-owned Life Insurance Corporation (LIC) of India reported a 9.48% Y-o-Y increase in its new business premiums, reaching Rs 17,131 crore. Meanwhile, private sector insurers collectively saw an 18% Y-o-Y growth in NBP, amounting to Rs 13,216.51 crore, showcasing their growing market influence.
Regulatory Changes on Surrender Values
A key regulatory development affecting the industry came into effect on October 1, when revised surrender value norms mandated that life insurers pay an enhanced special surrender value to policyholders after the first policy year, provided they had paid one full year’s premium. Previously, policyholders surrendering their policies within the first year were not eligible for these payments.
While insurers had requested more time to adapt to these new norms, the insurance regulator did not grant an extension. Despite the short timeline, most insurers managed to implement the new regulations for approximately 80% or more of their product lines. However, the rapid adaptation to these norms did create challenges, as evidenced by a notable drop in policy sales.
Analysts’ Insights on Premium Growth Drivers
Analysts attribute the October NBP growth to strong demand for term insurance and unit-linked insurance plans (ULIPs), both of which likely offset any adverse impact of the revised surrender norms. According to a report by Nuvama, the October growth was relatively stable despite the surrender value regulation’s impact, although it warned that the industry may see fluctuating growth rates in the coming months as insurers continue to adjust to the new norms. “In the coming months, growth may fluctuate as the industry finds its balance,” the report noted.
Breakdown of LIC’s Performance
LIC, India’s largest life insurer, saw mixed performance across its segments. Its individual premium segment fell by 9.4% Y-o-Y to Rs 3,712.62 crore, while its group premiums surged by 15.5% Y-o-Y, reaching Rs 13,267.93 crore. LIC’s group yearly premium collections experienced an extraordinary 140.75% increase, totaling Rs 150.54 crore, which underscores the company’s continued strength in group policies, especially during uncertain economic times.
Performance of Major Private Insurers
Among private insurers, SBI Life Insurance, the largest in the private sector, reported a minor 3.8% Y-o-Y decline in NBP, closing at Rs 2,648.38 crore. HDFC Life, however, saw substantial growth, with its NBP rising by 28% Y-o-Y to Rs 2,799 crore. ICICI Prudential Life, Bajaj Allianz Life Insurance, and Max Life Insurance also posted impressive Y-o-Y NBP growth rates of 25.29%, 21.46%, and 15.3%, respectively.
This performance highlights the varying strategies among private insurers, as some companies focus on capturing new business at scale, while others prioritize niche segments or improved customer retention.
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Industry-Wide Growth in April-October Period
The April-October period witnessed robust growth for the life insurance industry, with NBP increasing by 18.56% Y-o-Y, amounting to Rs 2.19 trillion. LIC experienced nearly 22.5% growth in premiums over this period, reaching Rs 1.32 trillion, while private insurers collectively posted a 12.9% rise, totaling Rs 86,880 crore. This sustained growth trajectory reflects the resilience of the life insurance sector, even as it navigates regulatory changes and evolving customer preferences.
Decline in Policy Sales
Despite the positive premium growth, the total number of policies sold in October 2024 fell to approximately 1.2 million, marking a steep 46% decline compared to October 2023. This reduction in policy sales is largely attributed to the new surrender value norms, which have impacted early policy surrenders. The April-October period also saw a decrease in the number of policies sold, with a 5.42% Y-o-Y drop to 14.5 million.
Industry experts suggest that while policy sales have declined, the enhanced surrender benefits may encourage policyholders to maintain their plans for longer durations, potentially leading to improved long-term retention rates.
Outlook for the Life Insurance Sector
The life insurance industry in India is likely to experience some volatility as it adjusts to the revised surrender value norms. However, the underlying demand for life insurance products—particularly in the term and unit-linked segments—remains strong. Private insurers are expected to continue capturing market share as they expand product offerings and innovate in customer service and digitalization.
With the RBI’s recent interest rate hikes and macroeconomic factors likely to influence customer buying behavior, the sector may face short-term challenges but is positioned for steady growth in the long term. As insurers adapt to regulatory shifts and focus on customer-centric products, the industry will likely see a recalibration of growth strategies aimed at both premium growth and policyholder retention.
