Invest wise with Expert advice

LIC widens the NBP growth gap over private insurers in August

10 Sep 2024 , 02:21 PM

LIC WIDENS ITS LEAD IN NBP OVER PRIVATE INSURERS

The Life Insurance Council released full month data stack of new business premium (NBP) collections for August 2024 and for the cumulative 5 months from April to August of FY25. The news is that in August 2024, it is once again LIC that dominates in terms of growth in new business premium (NBP). It has also widened its lead over the private players. Apart from the NBP growth data, the Life Insurance Council also publishes data on the growth in number of policies. On this measure, it is the private sector insurers that have done better than LIC in August 2024, with LIC actually recording negative growth in number of policies in the month. In the last few months, LIC has shifted its focus more towards growth in new business premium and the impact is showing on the performance and on the LIC stock price.

There has been a quiet shift in the way life insurance is being sold in India, with the forced tax benefits under Section 80C reducing. Tax payers at the entry level are increasingly giving up such tax benefits for a simpler new tax regime (NTR). In the full union budget presented on July 23, 2024, the finance minister, Nirmala Sitharaman, added benefits like higher standard deduction only to those taxpayers who follow the new tax regime. These moves by the government are likely to drive more people to adopt the NTR and that means less of tax-push investments in life insurance. That is good in a way. Life insurance will now be sold as a life risk cover and an integral part of the financial plan; rather than just as a tax saving tool.

LIC GIVES STRONG NBP GROWTH DISPLAY IN AUGUST AND FY25

The table below captures the performance of LIC, private insurers and the overall insurance sector for the month of August 2024 in terms of first year premiums and the yoy growth in premiums over August 2023. Premiums flows, here, refer to first year premiums only.

premiums over August 2023. Premiums flows, here, refer to first year premiums only.

PARTICULARS	NBP (Aug-2024)	NBP (Aug-2023)	Growth YOY (%) Aug-24 / Aug-23	Growth YOY (%) FY24 / FY23
Individual Single Premium	4,302.58	3,970.95	8.35%	15.54%
Individual Non Single Premium	9,160.08	8,298.32	10.38%	17.25%
Group Single Premium	17,894.61	13,061.75	37.00%	25.67%
Group Non Single Premium	79.81	547.77	-85.43%	-8.69%
Group Yearly Renewable Premium	1,207.01	909.77	32.67%	-1.97%
Grand Total Premium Flows	32,644.09	26,788.55	21.86%	20.78%
PRIVATE INSURANCE COMPANIES
Individual Single Premium	1,825.71	1,708.69	6.85%	10.68%
Individual Non Single Premium	6,589.59	5,735.05	14.90%	23.23%
Group Single Premium	4,405.24	4,307.83	2.26%	3.33%
Group Non Single Premium	9.96	14.29	-30.30%	5.97%
Group Yearly Renewable Premium	504.49	730.16	-30.91%	-16.11%
Private Insurer Premium Flows	13,334.99	12,496.02	6.71%	11.04%
LIC OF INDIA
Individual Single Premium	2,476.87	2,262.26	9.49%	19.58%
Individual Non Single Premium	2,570.49	2,563.26	0.28%	5.59%
Group Single Premium	13,489.37	8,753.92	54.10%	34.11%
Group Non Single Premium	69.85	533.48	-86.91%	-9.06%
Group Yearly Renewable Premium	702.52	179.61	291.14%	133.71%
LIC Premium Flows	19,309.10	14,292.53	35.10%	27.73%

Data Source: Life Insurance Council (New Business Premiums – NBP figures are ₹ in Crore)

What do we read from the data on insurance business for August 2024 in terms of the first year premium collections by insurance companies?

The overall insurance sector saw robust yoy growth in first year premiums of 21.86% in August 2024. What is material about the performance of insurers in terms of new business premiums (NBP), is that the undertone since December 2023 shifted in favour of LIC and the trend has continued through to August 2024; although private insurers are starting to show better NBP growth traction. The private insurers saw first year NBP expand by 6.71% in August 2024 while LIC saw first year NBP expand by 35.10% yoy. LIC has done a lot better in August 2024 in terms of NBP growth compared to July and June 2024. Similar trend is visible on a cumulative basis too. Overall NBP for FY25 (Apr-Aug) has grown 20.78%, but the dichotomy is again favouring LIC. For the first 5 months of FY25, private insurers grew NBP by 11.04% while LIC grew at 27.73% on yoy basis.
If you look at the overall premium collections for the month of August 2024 it is lower than July at ₹32,644 Crore. It is the contribution of LIC that improved compared to the private insurers. For instance, private insurers saw their share of NBP fall to 40.85% I August 2024; compared to 42.08% in July, but better than 33.15% in June, 38.26% in May, 38.87% in April, and 39.71% in March. Private insurers have faltered after seeing record share in July 2024. In contrast, LIC accounted for 59.15% NBP market share; compared to 57.92% of total NBP in July 2024, 66.85% in June, 61.74% in May, 61.13% in April, and 60.29% in March. However, the positive takeaway for the private insurers is that they are holding their NBP share above 40% over the last 2 months.

Compared to July 2024, the private insurers may have faltered on NBP growth, but their market share of NBP still remains robust. LIC appears to be the real turnaround story.

LIC STILL STRUGGLES ON GROWTH IN POLICY NUMBERS

If new business premiums (NBP) is about fresh money flows into the insurer, the number of policies are about the retail spread as the future funnel of growth. To paraphrase it in a different way; NBP deepens the wallet share while number of policies widens the client base. For an insurance company, both these factors matter. The table below captures the performance of LIC, private insurers and the overall insurance sector for August 2024 in terms of growth in the number of policies; compared to the base of August 2023.

terms of growth in the number of policies; compared to the base of August 2023.

PARTICULARS	Policies (Aug-2024)	Policies (Aug-2023)	Growth YOY (%) Aug-24 / Aug-23	Growth YOY (%) FY24 / FY23
Individual Single Premium	1,23,155	1,17,249	5.04%	16.52%
Individual Non Single Premium	22,66,872	23,07,851	-1.78%	5.77%
Group Single Premium	285	180	58.33%	77.64%
Group Non Single Premium	463	372	24.46%	8.96%
Group Yearly Renewable Premium	3,232	3,243	-0.34%	3.11%
Grand Total No. of Policies	23,94,007	24,28,895	-1.44%	6.27%
PRIVATE INSURANCE COMPANIES
Individual Single Premium	25,738	21,098	21.99%	20.00%
Individual Non Single Premium	7,31,248	6,94,530	5.29%	11.84%
Group Single Premium	241	146	65.07%	73.33%
Group Non Single Premium	17	10	70.00%	17.39%
Group Yearly Renewable Premium	534	606	-11.88%	3.44%
Private Insurer No. of Policies	7,57,778	7,16,390	5.78%	12.11%
LIC OF INDIA
Individual Single Premium	97,417	96,151	1.32%	15.54%
Individual Non Single Premium	15,35,624	16,13,321	-4.82%	2.99%
Group Single Premium	44	34	29.41%	97.62%
Group Non Single Premium	446	362	23.20%	8.73%
Group Yearly Renewable Premium	2,698	2,637	2.31%	3.02%
LIC No. of Policies	16,36,229	17,12,505	-4.45%	3.65%

Data Source: Life Insurance Council (Number of Policies are absolute figures)

Here are some quick takeaways from the data points on insurance for August 2024 in terms of number of policies sold.

The overall insurance sector saw yoy contraction in number of policies sold at -1.44% for August 2024. There was a minor dichotomy. Private insures saw growth of 5.78% in number of policies sold in August 2024 while LIC saw contraction in the number of policies sold at -4.45%. Generally, growth in number of policies is dominated by private insurers and the month of August was no exception. If you look at the cumulative data for the 5 months of FY25, it is the private insurers who continue to lead the growth stakes, but in this case, the performance of LIC is a lot better on cumulative basis.
If you look at the overall number of policies sold for August 2024 at 23.94 Lakh policies, the contributions of LIC and private insurers are still far off. However, private insurers saw their share of number of policies taper further to 31.65% in August 2024; compared to 31.87% in July, 32.79% in June, 33.03% in May, and 35.17% in April. The share of number of policies has been steadily falling for the private insurers. In contrast, LIC saw its share of number of policies at 68.35% in August 2024; steadily higher compared to 68.13% in July, 67.21% in June, 66.97% in May and 64.83% in April.

Let us now turn to how the six largest private life insurers saw NBP growth adding up in the month of August 2024.

NBP TRENDS: KEY PRIVATE LIFE INSURERS BUILD HEFT IN AUGUST 2024?

In the month of August 2024, private insurers saw 6.85% growth in new business premium (NBP), although it was still LIC that made the best of its first mover advantage. In terms of number of policies sold, the private sector dominated LIC, although their share of policies have been falling consistently. Here is a look at the 6 major private life insurers, whose NBP accounts for 74.55% of the total NBP collected by private insurers in August 2024. We start with HDFC Life Insurance, which emerged the biggest private player by NBP in August 2024.

HDFC LIFE INSURANCE COMPANY	Aug-24 NBP (₹ in Crore)	Aug-23 NBP (₹ in Crore)	YOY Growth (in %)
Individual Single Premium	344.06	344.12	-0.02%
Individual Non Single Premium	1,060.08	962.70	10.12%
Group Single Premium	1,377.65	1,371.08	0.48%
Group Non Single Premium	0.00	0.00	N.A.
Group Yearly Renewable Premium	15.23	21.25	-28.33%
Total	2,797.03	2,699.15	3.63%