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Insurance No major impact of demonetisation on insurance industry

No major impact of demonetisation on insurance industry

While the demonetisation exercise attracted new business premium in the life insurance industry in the initial months, it has not increased subsequently.
Rosevina Gonsalves Nov 8, 2017

Contrary to the widely held belief that demonetisation has led to a surge of inflows across all financial assets, the data collated from IRDAI shows that the move has not helped the life insurance industry substantially.

The life insurance industry  collected new business premium of Rs.1.80 lakh crore in November 2016-September 2017 as against Rs.1.48 lakh crore in November 2015-September 2016, a growth of 20% or Rs.31,850 crore. On the other hand, the industry had received new business premium of Rs.1.14 lakh crore in November-September 2015. This indicates that the industry saw a growth 30% or added Rs.34,000 crore to its kitty.

Clearly, the life insurance industry had a better growth rate both – in percentage and absolute terms in pre demonetisation era.

However, in the month of November 2016, the life insurance industry collected new business premium of Rs.16,061 crore as against Rs.7,553 crore in November 2015, a massive growth of 113%. Surprisingly, the premium growth remained flat between December 2016 and September 2017.

Experts believe that since insurance companies do not accept cash, demonetisation did not have a significant impact on the life insurance industry. Kapil Mehta, CEO, SecureNow Insurance Broker said, “The premium has to come from banking channel. In addition, people do not buy insurance just because they have money lying idle in bank; instead, they buy insurance to cover their risks.”

However, a few experts have a different view. Vighnesh Shahane, CEO and Wholetime Director, IDBI Federal Life Insurance claims that his company has witnessed unprecedented growth post demonetisation. He said, “We have witnessed healthy growth in the new business premium which lasted for five months post demonetisation. In my view, the move has helped financial services industry in a big way.”

First year business premium

Month/Year

2014-15

2015-16

2016-17

Nov

8385

7553

16061

Dec

10071

11026

13012

Jan

9191

10283

13138

Feb

7610

11296

10791

March

22561

31489

34675

April-Sept

56287

76236

92065

Total

114105

147883

179742

 

 

Source: IRDAI

 

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