India’s first-year life insurance premiums dip 25.3%

CareEdge forecasts the industry to have a positive growth trajectory in the long-term.

After experiencing robust growth in fiscal year 2023 (FY23), first-year life insurance premiums in FY24 have shown a subdued trend, data from the Life Insurance Council (LIC) showed.

In November 2023, first-year premiums witnessed a decline of 25.3% year-on-year (YoY), contrasting with the 30.5% YoY increase in the same period the previous year. Several factors contributed to this decrease, including a fall in group premiums, changes in taxation norms, and the impact of holiday-shortened months.

Furthermore, the year-to-date first-year premiums for FY24 reported a 12.7% YoY drop compared to the substantial 34.1% YoY growth in the same period in FY23. 

The year-on-year decline can be attributed to a significant reduction in group premiums, the introduction of a new tax regime, and the heightened momentum experienced in March 2023. 

Although private insurance companies have sustained growth and helped counteract the dip in LIC premiums, their pace has been comparatively subdued, with larger private companies exhibiting better growth than their smaller counterparts.

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In FY23, life insurance companies demonstrated significant top-line growth, benefiting from factors such as the absence of COVID-related constraints for the full year, an increase in the non-participating (non-par) segment in the last quarter of FY23, and a rise in term policies (protection plans), said CareEdge Ratings.

However, in YTDFY24, the industry has experienced a slowdown, attributed to customers purchasing insurance policies in March 2023 ahead of budgetary changes and a deceleration in group business.

Despite these short-term fluctuations, the overall growth potential of the life insurance segment remains resilient. 

Factors such as the existing protection gap in the market, a regulatory framework fostering industry development (such as "Insurance for all" by 2047), and the sustained need for insurance provisions contribute to the positive long-term trajectory for growth in the life insurance sector, according to CareEdge.