Experts attributed the decline to slow economic growth and high inflation rate. However, they are optimistic of recovery within 6 months.
The life insurance sector continued their declining streak for the second consecutive year as premium collection fell by 6.3 percent.
Even March which is the time when there is a rush to pay premiums in order to meet tax-planning commitments did not lift the mood in the industry. This March, the premium collection showed a decline of 7 percent as the life insurers collected Rs 22,508 crore against Rs 24,216 crore in the corresponding month last year.
Unlike general insurance sector which grow by a robust 19 percent last year, the life insurance sector has shrunk with the premium collection of Rs 1,07,010 crore in financial year April 2012 –March 2013 against Rs 1,14,232 crore in the corresponding period last year.
IRDA data shows sharp decline in premium collections of private sector as well as LIC. The premium collection of LIC has fallen by 6.5 percent while the private underwriters recorded 6 percent fall. LIC had a total premium collection of Rs 76,245 crore against Rs 81,514 crore in the corresponding period last year while the private insurers have collected Rs 30,765 crore against Rs 32,718 crore last year.
The premium collection in group non-single premium registered sharp decline of 60 percent. However, the group single premium collection of insurers has surged by 15 percent raising some hopes of revival in the life insurance business.
Among private players, Reliance Life’s premium collection dropped by 24 percent while ICICI Prudential reported a downfall of 5 percent. However, the HDFC Standard Life has managed to increase its premium collection by 15 percent.
Industry experts attributed the decline to high inflation and slow economic development. They said the underperformance of market and mis-selling of insurance products by some agents has adversely affected the insurance sector. However, the experts said that they are expecting of recovery in six months.
Mukesh Patel, Gujarat based financial advisor said that people have lost their interest in insurance policies which are generally long term in nature. Now, investors prefer tax saving instruments like ELSS, RGESS and NPS over insurance policies.
A Mumbai based insurance advisor, Yogesh Sabnis feels that the decline in insurance premium collection is perhaps a good sign as people are getting more aware about other tax saving avenues. He said that people are now eager to buy term life insurance rather than asking for traditional whole life insurance policies. As the premium of term insurance is comparatively lower, the IRDA figures are showing negative growth, he added.