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LIC fast losing market share: Brics Securities

May 15, 2007 12:06 IST

Even though the Life Insurance Corporation of India increased its market share to 74 per cent in terms of total new business premium policies in March 2007, compared with 72 per cent in March 2006, it has lost market share in new individual non-single premium policies.

For March 2007, LIC's market share in new individual non-single premium policies was 63 per cent, down from the November 2006 peak of 71 per cent, according to a research paper by Brics Securities. The paper says that the slackness in LIC's growth should be seen in conjunction with its single premium growth. A significant portion of LIC's premium income is coming from single premium policies; 46 per cent of the total premium in FY07 against 31 per cent and 40 per cent in FY05 and FY06, respectively.

However, even on an adjusted basis, the annualised premium equivalent growth of LIC at 88 per cent was below the private sector APE growth of 99 per cent.

D K Mehrotra, MD, LIC said, "The overall market share has not come down. If we have lost market share in conventional products, we have gained market share in other products. In November 2006, (when LIC's market share was at peak 71 per cent) Unit Linked Insurance Plans were the flavour of the season. Customers wanted ULIPs."

According to Mehrotra, the rise or dip in the market share for a type of product can be attributed to the demand for those products at that time.

The life insurance industry recorded 47 per cent growth in the new individual non-single premium policies segment in March, while the cumulative year-on-year growth for FY07 stood at 91 per cent, the Brics paper says.

LIC, meanwhile, reported 24 per cent growth for the segment in March, and y-o-y FY07 growth of 85 per cent. The FY07 numbers confirm that the 180 per cent year-to-date growth LIC reported till November 2006 was an aberration, which has been reversed over the last four months, says the Brics paper.

The paper adds that "the overall sector growth of 91 per cent in FY07 is unsustainable and growth may taper down to 40 per cent in FY08. In our view, with LIC continuing to lose market share, private players can continue to post healthy growth rates even if the overall sector slows down".

Meanwhile, Bajaj Allianz overtook ICICI Prudential in terms of monthly market share in non-single premium policies in March for the first time ever. Bajaj's market share among private players in the segment for March stood at 29.1 per cent against ICICI Prudential's 23.8 per cent.

In new business premium policies for 12 months upto March 31, 2007, Life Insurance Corporation of India registered 118 per cent growth at Rs 55,934.69 crore (Rs 559.34 billion) compared with Rs 25,645.19 crore (Rs 256.45 billion) in 2005-06.

The 15 life insurance private players have registered new business premium policies of Rs 19,471.83 crore (Rs 194.71 billion) upto March 2007 compared with Rs 10,252.76 crore (Rs 102.52 billion) in March 2006, registering a growth of 90 per cent. The total life insurance industry grew by 110 per cent, registering new business premium policies of Rs 75,406.52 crore (Rs 754.06 billion) 2006-07 compared with Rs 35,897.95 crore (Rs 358.97 billion) in 2005-06.

BS Reporter in Mumbai