State-run Life Insurance Corporation of India (LIC) contributed 50.5% of total first-year individual single and non-single premium income in the financial year ended 31 March 2020 (FY2020) compared with 61.3% in FY2010, notes CARE Ratings.
In comparison, the contribution of individual single and non-single premium income to total first-year individual premium income during FY2020 was 49.5% for private insurance companies as against 38.7% recorded in FY2010, as private players focused more on individual premium products, reported Moneylife quoting the CARE Ratings report.  

“The rise of the private companies can be attributed to the focus on metro cities, on high value insurance policies, which generated larger premiums, digital push, and expansion of multiple distribution channels like bancassurance and digital compared with LIC’s focus on the agency channel,” the report said.

CARE Ratings has divided the period from FY2010 to FY2020 in two phases: first, when private insurers faced the larger impact of regulatory changes and second, when private insurers recovered lost ground and outpaced LIC.

First phase

The first phase is the period from FY2010 to FY2014. On the basis of total individual first-year premium income, the market share of LIC witnessed an increasing trend during this period, while private players witnessed a declining market share trend.

“The bulk of the decline happened during the years of major regulatory changes, which necessitated significant effort on the part of the insurers to adapt. Several products (predominantly, unit linked insurance policies) were rendered ineligible and insurers had to re-design them to comply with the new regulations, resulting in a sharp decline in product offerings,” the ratings agency said.

Second phase

The second phase spans the years from FY2014 to FY2020, which can be divided into two further phases. From FY2014 to FY2017, LIC’s individual first year premium growth was slow (CAGR of 2.2%) as compared to private players’ CAGR of 13.7% as there was an increase in the distribution channels of private players. 

From FY2017 to FY2020, LIC’s individual first-year premium registered a CAGR growth of 3.0% as compared to CAGR growth of 11.9% among private players. 

LIC’s market share declined from 68.5% in FY2014 to 50.5% in FY2020.  

The shift in individual first year premium market share can be attributed to several structural and regulatory changes, CARE Ratings said, adding, “Private players underwent transformation leading to increased penetration, higher coverage, rise of multiple channels including agency, bancassurance, broking, direct and corporate agency, superior reach, and intensifying competitiveness in the market. The overall industry has also witnessed trends such as increased digital presence, emergence of InsurTech around customer education and service, products, technology and delivery systems for access.”

LIC dominates with a 75.9% share in FY2020 in the number of policies bought by individuals, while private players dominated with a 67.7% share in sum assured for individual first year policies.

 

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