Private life insurer IndiaFirst Life Insurance, which is promoted by Bank of Baroda and Union Bank (after promoter bank Andhra Bank was merged with the latter) saw a 65.6 percent YoY decline in its new business premium in April and May 2020, to Rs 106 crore amidst the coronavirus (COVID-19) outbreak.
In an interaction with Moneycontrol, IndiaFirst Life Insurance Deputy CEO Rushabh Gandhi said the bancassurance-model led companies have been badly impacted.
“It has been a tough year for the life insurance industry. There has been a 35 percent degrowth for private sector in the new business annualised premium equivalent (APE). Bancassurance companies are affected more than agency-led firms because banks have only been doing core activities like withdrawals, deposit and basic loans,” he added.
For the April 1-May 31, 2020 period, the individual regular premiums collection for IndiaFirst Life dropped by 58.2 percent year-on-year to Rs 30.42 crore. Single premium business (individual) dropped by 63 percent to Rs 1.10 crore.
Bancassurance or bank-led sales account for almost 55 percent business for the life insurance industry. Sales happen through bank branches where dedicated personnel sell insurance policies to the customers.
With the COVID-19 lockdown being announced from March 25, banks have been either operating at a reduced manpower strength or with reduced daily timings. Those located in containment zones have stayed shut. Customers have also chosen to transact online to avoid catching the infection at locations like banks.
Apart from IndiaFirst, in the April 1-May 31 period, ICICI Prudential Life Insurance (promoted by ICICI Bank) saw a 29.6 percent decline in new premium collection, IDBI Federal Life (promoted by IDBI Bank) saw a 55.8 percent decline in new premiums and Kotak Life Insurance (promoted by Kotak Bank) saw a 56.8 percent drop in first-year premiums.
Sources also told Moneycontrol that the government has asked banks to strictly adhere to rules and not engage in non-core activities like sale of insurance at the branches till the lockdown is completely lifted.
For IndiaFirst Life, business used to come in from Bank of Baroda and Andhra Bank. But Andhra Bank has now become part of Union Bank of India after the PSU bank amalgamation concluded on April 1. Gandhi said insurance sales through Union Bank have not started yet and that the company is expecting it to begin soon.
From June 2020, Gandhi said that there has been a partial improvement in the number of customers walking in to the branches. The company is hoping for an improvement in numbers from H2 of FY21.
“We are not a metro-centric insurer and the 9,500 odd Bank of Baroda branches are located across the country, especially in smaller towns where the impact of COVID-19 has been minimal,” he added.
With respect to the product mix, Gandhi explained that there has been a rise in the number of term/protection plans being purchased. He added that 40 percent of the number of policies underwritten in April and May were protection plans compared to 2 percent in the year-ago period.
“Because of the stock market volatility, customers are staying away from unit-linked insurance plans and opting for guaranteed plans. Hence, we are strengthening our product suite in the guaranteed plan segment,” said Gandhi.