As per the data published by the Insurance Regulatory and Development Authority of India (IRDAI), life insurance companies logged a growth of 11.36% in the collective sum assured. The sum corresponds to the collection during the end of the financial year 2019-2020. In contrast, the new premium collection dropped 32% to Rs.25,409.30 crore in March 2020 as compared to Rs.37,459.36 crore in March 2019.
Life Insurance Corporation (LIC), with the largest market share of around 76%, reported 31% dip in new premium income during the last month of FY20 as compared to the same month in FY19. Other private insurers have also been hit, such as Aviva Life Insurance(-80.18%), Pramerica Life (-73.1%), and Future Generali Life (-62.24%).
The lockdown imposed across the nation due to COVID-19 has created an adverse impact on the life insurance sector. Since the social distancing norm began early March, it majorly affected the sale of fresh policies for tax-saving purposes during the month.
Another cause for the drop in sales can be attributed to the new tax regime. Though the new tax regime is applicable from the next financial year, individuals may have opted for another long-term commitment if they do not intend to avail tax deduction from the next year.
A growth of 37.5% in the new business premium of life insurers was seen in December 2019 as compared to the same month previous year. However, the growth started to decline in the following months—18% in January 2020, 1.8% in February 2020, and a negative value in March 2020.
COVID-19 has already paralysed the daily lives of the people as well as the entire economy. Further, it makes the purchase of new policies the least priority as mobilising the savings may not be easy in the days to come. Similarly, social distancing norms will make the new business to continue to be low in the near future.
The situation opens up all possibilities for individuals to get attracted towards simpler and fixed returns giving financial products. Life insurers need to look at such a product structure to stay afloat in terms of sales.
In addition, the country has been looking at the lockdown extension in many parts. Even in those parts where the lockdown is lifted, social distancing still needs to be followed. Consequently, the life insurance sector has to quickly adopt digital engagement with potential customers. This can answer the void that has been created between the insurers and customers due to the lack of an opportunity to physically meet.
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