Private sector market leader ICICI Prudential has reported just a 20 per cent rise in new retail business weighted premiums during March, 2008, and a 40 per cent rise for the quarter ended March 2008.
That has dragged down ICICI Prudential's growth for 2007-08 to below 70 per cent. The average for the first 11 months was 80 per cent.
While not wanting to draw any definite conclusion from the March numbers, industry watchers believe that given the state of the stock market, the life insurance industry growth rate may slow down in the current financial year.
The growth in premium incomes for private sector players in 2007-08 is expected to be around 80 per cent. Till end-February, it was about 90 per cent.
The average returns from unit-linked insurance products in the March 2008 quarter have fallen 8-30 per cent. With the Sensex down about 23 per cent during this time, several schemes have under-performed the broader market.
However, given that insurance products are long-term in nature, the returns for three months can hardly be a measure of performance for the industry's fund managers.
Nonetheless, if the flow of premium income slows down, it could have some impact on the equity markets because nearly 85 per cent of the insurance products sold today, especially by private insurers, are ULIPs. On average, 50 per cent of the premium from these products was being invested in equities with the remaining amount being invested in fixed income instruments.
However, fund managers say that incrementally a higher proportion of 80-90 per cent is being invested in equities. According to estimates, Rs 55,000 crore (Rs 550 billion) has been invested by life insurance companies in the stock markets in 2007-08.
With life insurance firms aggressively expanding their distribution network, especially in tier II and III towns, new business premiums in January and February this year had grown by 95 per cent for the private sector. Ticket sizes have remained fairly stable with the average industry ticket size being in the region of Rs 24,000-25,000 premium per policy.
This trend has actually foxed industry watchers, who had expected ticket sizes to fall as insurers moved into smaller towns. However, as of now that has not happened, implying there is wealth in smaller towns too.
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