Individual Life Insurance Business Faces Slowdown in September 2019

Individual Annualised Premium Equivalent (APE) has dropped by 3% year-on-year (y-o-y) in September 2019 as compared to the 11%-27% y-o-y growth in April-August 2019. The overall APE has risen by 3% y-o-y with stronger group business. Net inflows to equity mutual funds also dropped sharply month-on-month (m-o-m).

A slow decline was observed consecutively for the third month in ICICI Prudential Life’s APE. Similarly, there was a decline in the performance of the high-growing HDFC Life after a continuous rise for five months. In contrast, SBI Life and Max Life remained on the moderate side for the second consecutive month. 

In the overall APE, the private sector players reported a 3% y-o-y growth in September 2019. Further, there has been a 3% y-o-y growth in individual APE. However, the overall individual industry observed a decline of 3% y-o-y due to a sharp decline of 11% y-o-y as reported by LIC.

Getting deeper into the details, ICICI Life reported a 7% y-o-y decline in individual APE despite a flat y-o-y seen in September last year. It was lower than a 10% decline as compared to August 2019. In the individual non-single segment, the average ticket size was said to be flat y-o-y (up to 2% m-o-m). The other players had declared higher y-o-y growth metrics. 

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When the overall adjusted APE is considered, including accrued and excluding received premium, the APE had dropped by 6% y-o-y as compared to the 8% decline in August 2019. As the decline in growth rate has remained over the second consecutive month, it has been nearly impossible to understand the near-term trajectory.

A similar situation persists with HDFC Life where a 20% y-o-y decline in September 2019 in individual business is reported after noting a strong growth peak of 30-90% during April-August 2019.

It led to a decline of 17% in the overall APE; however, the group business was moved up by 3% y-o-y. To make up with the loss, the market researchers suggest that to reduce the incentive structure on the fast-selling non-par savings products.

On the other hand, net mutual fund inflows to equities saw a drop from Rs.58-86 billion observed in June-August 2019 to Rs.46 billion in September 2019.

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