Is party of life insurance industry over?

After having shown a positive growth for the August-October period, the life insurance industry has gone for a toss when it comes to its performance in the month of November, in which the industry reported a fall in terms of Annual Premium Equivalent (APE) by 44.4 per cent, as per a study by Emkay Global.

The de-growth can be largely attributed to the 62.6 per cent year-on-year (YoY) APE degrowth for LIC. The private-sector life insurers performed relatively better with APE de-growth of merely 8.2 per cent.

The industry witnessed premium collection of Rs19159.31 crore for the month of November as against Rs 26221.24 crore in the year ago period, thus registering a decline.

Of course, the de-growth has been less in the private sector peers. But the issue was that LIC is the biggest player and so the industry has taken a bigger hit due to the Corporation's sharp decline in business in the month.

So, what ails the sunshine industry? Again, just a month's figure can't be any indicator. For LIC chairman MR Kumar, it is nothing, but a base effect as the Corporation had done very well in November last year, hope to make up this month.

The impact of the Covid-19 pandemic in life insurance industry, Kumar goes on, would be mostly on its investment income as the financial market volatility had also increased, followed by ULIP as well as Pension and Annuity business may get impacted severely.

True, the first quarter of the current fiscal, which also saw the spreading of Covid-19, was just like a dark spot for the otherwise ever-growing industry. However, the things had started improving from the very beginning of the second quarter itself. The reason was that all the 24 members of the industry had read the writing on the wall and had changed the tack by migrating on digital platform. Though, a late starter LIC has also improved a lot on the front and it was reflected in its business growth story, vis-à-vis its peers in the private sector.

Moral of the story is that lie insurers need to shift their focus to traditional life business like term insurance and endowment from the ULIP, which has been hit hard due to the volatile market condition.

One can only hope that situation would improve now on and the industry will regain the lost glory with help of the ongoing tailwinds in the market.