Life insurance segment looks positive amid rising interest rates


Rising interest rates from current lows should help life insurers. Interest rates are rising globally and persistent inflation – indicating a steady rise in rates – should create a different scenario for global life insurers and Indian private life insurers.

The current rise in interest rates is expected to support the profitability and growth of life insurers. The current rise in interest rates from historically low levels is expected to improve the NAV (value of new business) margins of life insurers’ participating and non-participating products (a participating (at par) insurance policy offers both guaranteed and non-guaranteed benefits, while a non-participating (non-participating) policy usually offers guaranteed benefits). A recent report from Emkay Global Financial Services indicates that even after increasing the guarantees of non-participating products to remain competitive, the possibility of maintaining a higher spread increases with high interest rates. In participating products, higher interest rates generally increase the surplus and therefore the share of the surplus for policyholders and shareholders.

The Emkay report highlights that private sector leaders are well positioned for strong growth and to gain market share in a challenging external environment. Against the backdrop of a rapidly changing external environment, changing customer demographics and product preferences, large private life insurers continue to take market share from LIC and will continue to do so. in the years to come. The report indicates that private life insurers have strong brands and distribution networks. At the same time, according to the Emkay report, the private sector majors in the life insurance segment are executing their strategy very well by being agile and innovative when it comes to offering insurance products corresponding to the preferences and needs of customers in a dynamic external environment. The report said companies such as SBI Life, Max Life, HDFC Life and ICICI Prudential Life Insurance performed well.

The report further points out that as far as group funds are concerned, corporate activities are mainly carried out by LIC and SBI Life, although other private players have also been expanding into this sector in recent years. The risk on this product is high when interest rates rise because it is a lumpy business, causing large cash inflows and outflows.

On the other hand, according to a recent report on life insurance from Motilal Oswal, the individual weighted received premium (WRP) for private players increased by 46% year-over-year (year-on-year) in April 2022, the LIC increasing by 28% year-on-year. . On the other hand, the market share of private players increased by 63% on April 22. The report highlights that the industry recorded a growth of 38.7% year-on-year. This was mainly due to a weak base in April 2021, which saw reduced volumes due to the appearance of the Covid-19 variant and led to blockages.

The Motilal Oswal report states that among the life insurance players listed, SBI Life recorded 89.2% YoY growth in April 2022 and IPRU also recorded 32.2% YoY growth, after reporting a muted trajectory over the past few months. HDFC LIFE recorded modest growth of 9.6% year-on-year, while Max Life recorded a decline of 4.6% year-on-year – the third decline in the past four months. Among players in the mid-size segment, Tata AIA, Bajaj Allianz and Birla Sun Life recorded year-on-year growth of 86%, 81% and 51% respectively. Kotak Life reported 19% year-over-year growth. While LIC recorded a 27.8% year-on-year growth (+11.5% in March 2022) in individual WRP.

The Motilal report further highlights that after reporting moderating growth from January-February 2022, the industry is enjoying a healthy recovery in March-April 2022 and is expected to remain healthy given the strong demand for annuities. , non-participating and recovery. in the protection sector, although ULIP’s growth may remain weak due to volatile market conditions.

The Motilal report finds that on an individual WRP basis, the combined market share of publicly listed players such as SBI Life, HDFC LIFE, MAX LIFE and ICICI Prudential Life stood at 58% in April 2022. At the same time, Bajaj Allianz and Tata AIA surpassed MAX Life in terms of individual WRP market share in April 2022.


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