Life insurers’ new business premium to grow 9-12% in FY24: ICRA

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Life insurance industry’s new business premium (NBP) is expected to grow 9-12 per cent in FY24 to ₹4.06-4.14-lakh crore, and by 11-13 per cent to ₹4.49-4.66-lakh crore in FY25, up from ₹3.71-lakh crore in FY23, according to ICRA.

With steady growth in renewal premium income, the gross premium written (GPW) is expected to increase to ₹8.56-8.64-lakh crore in FY24 and ₹9.37-9.55-lakh crore in FY25 from ₹7.86-lakh crore in FY23.

“Notwithstanding the contraction in NBP for LIC’s group business, the private sector continues to maintain the growth momentum in individual as well as group businesses. Accordingly, we expect the NBP expansion for private sector to continue to outpace industry growth,” said Neha Parikh, Vice-President and Sector Head – Financial Sector Ratings.

ICRA pegged NBP expansion for private life insurers at 13-16 per cent to ₹1.57-1.59-lakh crore in FY24 and further by 14-16 per cent to ₹1.80-1.87-lakh crore in FY25, adding that their market share in NBP is expected to increase to 40 per cent by FY25 from 37 per cent in FY23.

New business premium

Individual NBP for the industry expanded 15.4 per cent y-o-y in FY23 to ₹1.45-lakh crore, partly attributed to the significant growth in the guaranteed non-paticipating individual segment.

“The expansion was also driven by the levy of taxes on the returns from these policies if the annual premium paid exceeded ₹5 lakh per annum. This change was applicable from April 2023 onwards leading to sharp increase in premium in FY23,” ICRA said in the note.

This resulted in moderation in the industry’s individual NBP growth to 7.7 per cent y-o-y in H1 FY24, and is expected to rise by 8-10 per cent in FY24 and 10-12 per cent in FY25.

On the other hand, industry group NBP contracted 22.6 per cent in H1 FY24 because of shrinkage in LIC’s group business. The segment accounted for 75 per cent of LIC’s NBP in FY23 and LIC accounted for 63 per cent of industry NBP.

“Revival in its (LIC’s) group business will be critical for the overall NBP growth of the industry. In the absence of this, the NBP for the industry is likely to contract,” ICRA said.

Despite the growth in NBP, VNB (value of new business) growth for the industry is estimated to moderate in FY24, as the share of high margin (guaranteed non-participating individual) businesses is likely to decline, it said, adding that for LIC it will also remain contingent on its ability to diversify its product mix and widen its distribution network.