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Your Money: Gradual shift of the retail life insurance market to private players

A large part of this is attributable to the slow growth delivery of 6.2% in LIC’s y-o-y RWRP in Dec’21 vs. 22% growth in Nov’21. YTD FY22, private sector RWRP grew strongly at 30% y-o-y vs. a muted 5% y-o-y for LIC.

By: Sachin Telawane | 
Read Time: 3 minutes, 1 second | 
Last Updated: 11-01-2022
Your Money: Gradual shift of the retail life insurance market to private players
A large part of this is attributable to the slow growth delivery of 6.2% in LIC’s y-o-y RWRP in Dec’21 vs. 22% growth in Nov’21. YTD FY22, private sector RWRP grew strongly at 30% y-o-y vs. a muted 5% y-o-y for LIC.
The life insurance industry maintained strong growth momentum in December 2021, with retail weighted received premium (RWRP) seeing 21.2% year-on-year (y-o-y) growth for the month, slowing down marginally from 26% (y-o-y) growth in Nov’21. A large part of this is attributable to the slow growth delivery of 6.2% in LIC’s y-o-y RWRP in Dec’21 vs. 22% growth in Nov’21. YTD FY22, private sector RWRP grew strongly at 30% y-o-y vs. a muted 5% y-o-y for LIC.
The private sector’s share in RWRP rose by 6.2ppts in two years due to the sustained divergence in growth of the sector vs. LIC. The developments in FY22 validate the long-term trend of a gradual shift of the retail life insurance market to private players with strong brand and distribution reach.

Private players maintain growth
Maintaining strong momentum, RWRP for private insurers increased by 29.4% y-o-y in Dec’21, leading to YTD FY22 RWRP growth of 30% y-o-y. On a two-year basis, the private sector delivered 10.6% CAGR, whereas LIC’s RWRP declined at 3% CAGR. Growth driven by increased ticket size is reflected in the shift of product mix toward unit-linked insurance plans (Ulips) and non-par products. These factors corroborate the long-term trend of a gradual shift of the retail life insurance market to large private players with strong brand and a wide bancassurance network.

SBI Life saw a two-year CAGR of 11.6% in RWRP, higher than 10.6% for the private sector. With all its distribution engines firing and it being relatively immune from the reinsurance price hikes in protection, SBI Life is well-positioned to deliver strong, profitable growth over the coming years.

HDFC Life’s two-year RWRP CAGR stood at 14.6%, better than the private sector average. RWRP growth seems to be driven by ticket size growth as well as the individual policy count growth this month, as the count grew 16.5% y-o-y.
Max Life reported strong RWRP growth of 23% y-o-y for YTD FY22. The relatively slow growth of Max Life in H1FY22 has been a cause of worry amid Bajaj Life continuing to report very strong growth post its tie-up with Axis Bank. The strong rebound in Max Life’s growth addresses the concern and provides the much-needed comfort around the growth outlook of Max Life.

Private life insurers’ market share consolidate
The top-four private players’ share of private RWRP remained stable at 62% from a year ago. For the top 8 players (Top 4 + Tata AIA Life, Bajaj Allianz Life, Birla Sun Life and Kotak Mahindra Life Insurance), the market share in private RWRP was stable at 83%, despite sluggish growth for Kotak Mahindra Life and some acceleration for smaller bank-led insurers. Overall, the trend of market share consolidation toward bigger private life insurers continues.

LIC is struggling in retail segment
After the rebound in Nov’21, LIC’s growth in retail in Dec’21 slowed, and was materially lower than the private sector. This sustained undergrowth by LIC has meant that it has consistently lost market share in retail. With its unchanged way of doing business over decades, LIC may lose its stronghold in the retail life segment, particularly in the high-ticket segment. With the bank channel increasingly becoming important for savings product distribution and digital channels becoming important for retail protection, LIC may witness turbulent times in terms of growth due to its heavy reliance on the agency-led distribution mix.
This article was originally posted here.

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