People now have a much better understanding of the need for financial protection against life’s uncertainties. Thus, despite two Covid-19 waves, premium growth for life insurers remains on a strong trajectory. Number of policies for all insurers has also grown by a robust 10% in FY22 till date. Private life insurers reported robust growth of 34% and 28% YoY in November in terms of total annualised premium equivalent (APE) and individual APE, respectively, shows data by ICICI Securities. On sequential basis, total APE and individual APE grew at 14.5% and 6.8%, respectively. The claims have bloated too.

Latest data from Insurance Regulatory and Development Authority of India (IRDAI) shows the death claims rose by 41% in FY21 to ₹41,958 crore. Whereas, earlier in FY20, the death claims rose by 11% to ₹29,793 crore. The death claims further rose drastically by five to ten times earlier this year in April amid deaths during the second Covid-19 wave, before cooling off as the pandemic situation came under control during the second half of the year. However, industry experts still see a multifold rise in claims ahead.

“While Covid-19 claims have decreased, we have seen an increase in non-Covid-19 deaths, which have risen even more than past levels due to co-morbidities being triggered by Covid-19,” says Vighnesh Shahane, MD & CEO, Ageas Federal Life Insurance. The life insurance industry, says Shahane, would yet post a 200-300% increase in claims this year. This would seriously impact the profitability of most insurance companies.

The pandemic situation too is still uncertain. The emergence of the Omicron variant has significantly halted the march towards normalisation that characterised the second half of 2021. In India, as per Shahane, a third wave could potentially lead to a spike in claims which could have a direct adverse effect on the insurance companies’ solvency margin, embedded value and the profits declared in the medium- to long-term.

“There could also be an effect on persistency and new business depending on how the pandemic pans out and any further lockdowns,” he adds.

During the year 2020-21, the life insurance industry reported a profit after tax of ₹8,661 crore as against ₹7,728 crore in 2019-20, shows the IRDAI annual report. Out of the 24 life insurers in operation during 2020-21, 18 companies reported profits. The total profit reported by LIC during the year was ₹2,901 crore as against ₹2,713 crore in the previous year. The private insurers together reported profit after tax of ₹5,760 crore as against ₹5,016 crore in the previous year.

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