New Delhi: The Insurance sector in India has seen a significant slowdown in growth in the first quarter of the current fiscal. Premium from new policies has fallen 23%, according to the latest Insurance Regulatory and Development Authority (IRDA) report.
The figures show that the industry witnessed 15% growth between April and June this financial year as against 38% in the corresponding period last year. The total Annual Premium Equivalent (APE), which depicts new premium coming in every year, stood at Rs 9,611 crore during the first three months of FY- 09. LIC has witnessed a decline of 27% in its APE from Rs 4,927 crore in April-June last year to Rs 3,575 crore this year.
The slowdown in the economy and high inflation have forced banks to make lendings dearer, which inturn have dampened investments in the insurance sector. Insurance is not a top priority when it comes to consumer spends or investments. With less disposable income, insurance sales would be tougher. “With the uncertainty in the economy, people are spending less on insurance products which are considered major tax saving tools,” said a source. “Although the industry hasn’t faced any negative growth so far, there certainly has been a deceleration of growth in the industry,” said ICICI Prudential managing director Shikha Sharma.
According to sources, it is not just the sale of life and general insurance products which has been impacted by the volatility in the stock market. The demand for Unit Linked Plans (ULIP) also witnessed a drop in demand. The industry has seen a marginal shift away from ULIP to traditional products. “It is just a temporary phase. ULIPs will continue to be the preferred alternative for investors who are not interested in the shortterm market fluctuation,” said Ms Sharma.
Last year, the insurance sector witnessed about a 100% growth. This is even as the insurance perpetration in India is still at a low level at 4.1% of the GDP as compared to 8-10% of the GDP in some of the developed economies and the Asian markets. So far, 24% of the Indian households own life insurance policies and the average sum assured per household is just Rs 1,14,450 among the owner households.
The figures show that the industry witnessed 15% growth between April and June this financial year as against 38% in the corresponding period last year. The total Annual Premium Equivalent (APE), which depicts new premium coming in every year, stood at Rs 9,611 crore during the first three months of FY- 09. LIC has witnessed a decline of 27% in its APE from Rs 4,927 crore in April-June last year to Rs 3,575 crore this year.
The slowdown in the economy and high inflation have forced banks to make lendings dearer, which inturn have dampened investments in the insurance sector. Insurance is not a top priority when it comes to consumer spends or investments. With less disposable income, insurance sales would be tougher. “With the uncertainty in the economy, people are spending less on insurance products which are considered major tax saving tools,” said a source. “Although the industry hasn’t faced any negative growth so far, there certainly has been a deceleration of growth in the industry,” said ICICI Prudential managing director Shikha Sharma.
According to sources, it is not just the sale of life and general insurance products which has been impacted by the volatility in the stock market. The demand for Unit Linked Plans (ULIP) also witnessed a drop in demand. The industry has seen a marginal shift away from ULIP to traditional products. “It is just a temporary phase. ULIPs will continue to be the preferred alternative for investors who are not interested in the shortterm market fluctuation,” said Ms Sharma.
Last year, the insurance sector witnessed about a 100% growth. This is even as the insurance perpetration in India is still at a low level at 4.1% of the GDP as compared to 8-10% of the GDP in some of the developed economies and the Asian markets. So far, 24% of the Indian households own life insurance policies and the average sum assured per household is just Rs 1,14,450 among the owner households.
Source: The Economic Times
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