The life insurance industry reported a rise in new premiums for January 2021 amidst the tax savings season from the fourth quarter (Q4) onwards.
A report by CARE Ratings said the premium vis-à-vis sum assured pattern continues to indicate the preference for life insurance products as an investment tool than as just protection plan.
Premiums for single premium policies (primarily investment-oriented) accounted for a significant portion of the premium in January 2021.
The first year premium of life insurers increased by 3.7 percent in the month of January 2021 to Rs 21,390 crore due to an increase in single premiums. But the report pointed out that a fall in non-single premiums restricted this increase.
Even as the life insurance sector reported positive numbers for January 2021, the report said that year-to-date (YTD) numbers have continued to report negative growth in the first year premium collection.
The sector reported a 1.2 percent YoY drop in first year premium to Rs 2.12 lakh crore in the April 1 to January 31 period (FY21).
LIC continued to retain a dominant share in the first year premium for YTD January FY21. LIC's share was 67.4 percent as against 32.6 percent share of private companies.
The pandemic has created a rise in the demand for protection plans, while the market volatility continued to affect the demand for linked plans, the report stated.
Even as the market has witnessed strong performance recently, unit-linked insurance plans (ULIPs) may see some pressure. This is on the back of the Budget 2021 proposal to allow tax exemption for maturity proceeds of only those ULIPs purchased beginning February 1, 2021, which have an annual premium less than Rs 2.5 lakh.
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