Non-PAR Outperforms, ULIP Slows Down In Q4FY22: Emkay Global

In its latest insurance sector report, Emkay Global Financial Services has shared comprehensive details on the new business performance across product categories in the life insurance space during FY22.

Even though ULIPs made a strong comeback in 9MFY22 (Retail Annual Premium Equivalent +50% YoY), the category witnessed slowed down materially in Q4 (+8% YoY), driving FY22 ULIP Retail Annual Premium Equivalent (APE) growth to 33%. Pension products and non-par (savings) continued to grow strongly, but Annuity and par savings struggled, reflecting LIC's (the most dominant player in these segments) slow growth," the brokerage has said.

The materially slow growth in sum assured from individual new business vs. premium growth very clearly reflects the slowdown in Retail Protection volumes due to the demand impact stemming from price hikes and supply-side issues which limited insurers from underwriting retail term policies in H1FY22. The strong growth in Group Term Insurance (GTI) premium (+82% YoY) vs. 17% YoY growth in Sum Assured reflected strong price hikes in the GTI business.

"Going forward, with the interest rate cycle reversing, volatile equity markets, high inflation and the return of postponed discretionary consumption will mean that middle-class household savings will be under pressure, leading to some pressure on the life insurance savings business. Relatively speaking, the large private players, equipped with their superior brands and distribution networks and employing their agile and innovative approaches, are well-poised for strong growth and increase their market share," the brokerage has said.

Private sector leaders are well-positioned for strong growth and to gain market share amid a difficult external environment: In the backdrop of a rapidly changing external environment, changing customer demographics and their product preferences, the hypothesis of large private life insurers continuing to take market share away from LIC is playing well and will continue to be so in the coming years. Powered by their strong brands and distribution networks (especially the bancassurance reach), private sector leaders are executing their strategy very well by being agile and innovative when it comes to offering insurance products to match customer preferences and needs amid a dynamic external environment.