After a long period of slowdown in new business premium collection, the life insurance industry has managed to grow its premium collections by 22% in the first three quarters of FY 2013-14. The 24 players mopped up Rs 84726 crore in April-December against Rs 69185 crore in the corresponding period last year.
The growth was largely driven by LIC which alone contributed Rs 65,775 crore in industry’s new business premium kitty in April-December 2013 compared to Rs 50,237 crore in the corresponding period last year, a healthy growth of 31%.
Ritesh Sheth of Tejas Consultancy says that LIC had opened some new branches in small cities which helped it to collect good premium from these areas. Also, LIC has earned a good image among people due to its performance and healthy claim settlement ratio. In addition, LIC had carried out many agents training programme across the country to empower its strong distribution force, he added.
Suresh Sadagoppan of Ladder7 Financial Advisories seconds the view and attributed this growth to its strong agency penetration.
However, some experts believe that LIC and its agents had sold policies by misguiding people about new product guidelines till December. “Due to aggressive sales pitch by its agents and misleading promotion through advertisements that had the punch line - 'last time to buy your favourite product', the company had garnered inflows ahead of the proposed changes in policy structure and commission payouts by IRDA,” says a Mumbai based financial adviser.
LIC’s announcement to introduce a service tax of 3% in all policies had pushed its sales, said an industry official. Earlier, IRDA had mandated that service tax will not be included in the contractual premium and has to be collected from policyholders separately.
“Many insurance agents and companies pushed their products by misguiding people saying that ‘new policies will have high premium structure and low bonuses from January 2014,” says Pankaj Mathpal of Optima Money.
Private life insurers premium collection growth remain flat. Private life insurers collected Rs 18951 crore in April-December 2013 against Rs 18907 crore in the corresponding period last year. Baring Reliance Life, Max Life and Kotak Mahindra Old Mutual all other large insurance players like SBI Life, ICICI Prudential, Bajaj Allianz recorded a steep fall in their new business premium collection in April-December 2013.