India’s life insurance sector experienced a robust 20.2% year-on-year growth in Annual Premium Equivalent (APE) for June 2024, according to the Life Insurance Council (LIC). This surge is attributed to increased policy sales and a favorable comparison with the previous year’s figures.
In May 2024, individual policy issuance rose by 12.4% compared to the same month in 2023. Notably, LIC itself recorded a remarkable 20.8% increase in APE for June 2024, a significant improvement from a mere 0.4% in June 2023, largely thanks to heightened group premium activity.
Over the past two years, from June 2022 to June 2024, the sector achieved a compound annual growth rate (CAGR) of 14.3%. Private insurers led with a 17.8% CAGR, while LIC followed with a 10.2% growth rate.
CareEdge, a prominent ratings agency, attributed the growth in the first quarter of fiscal year 2025 (FY 2025) to enhanced insurance penetration, single premium policies, and the influence of a low comparison base from the prior year. Key factors driving this expansion include prudent underwriting practices, strong GDP performance, urban growth, an increasing appetite for protection plans, a youthful population, rural insurance initiatives, product innovations, and heightened awareness around retirement planning.
Moreover, advancements in digital infrastructure have strengthened various distribution channels. While the first quarter of FY 2025 is anticipated to yield strong results, margins may be compressed due to a shift toward Unit Linked Insurance Plans (ULIPs).
Looking ahead, CareEdge projects an annual growth rate of 11% to 13% for the life insurance industry over the next three to five years. This growth will likely pivot towards the agency channel to decrease dependence on bancassurance.
However, challenges such as regulatory changes impacting product offerings and commission structures, concerns over fraud and policy lapse rates, and potential negative macroeconomic factors remain on the horizon. Nonetheless, the medium-term outlook for the industry remains optimistic.
