Updated on: Thursday, July 29, 2021, 07:12 PM IST

Teji Mandi Explains: What to make of the recent performance of the life insurance industry?

Life Insurance products saw demand like never before during the pandemic. However, the sword that fought for them was also the one that made them bleed. On one hand, the companies sold the highest number of policies, while on the other hand, the claim count also went exorbitantly high under the impact of the second COVID-19 wave.

It's tough to imagine something could be useful to you after death, isn't it? That is exactly why selling life insurance products is always a tough nut to crack for agents. It is not a product that pulls customers. Rather, it requires a lot of pushing from agents to convince the buyers.

For those questioning the use and relevance of life insurance products, COVID-19 came as a rude shock. And, as fear psychosis kicked in, the insurance industry witnessed a renewed interest in buying these policies.

Story in Numbers

More people are buying the policies. And the trend is captured in numbers as well. In Q1FY22, HDFC Life's new business premium (NBP) and value of new business (VNB) grew by 40% YoY.

ICICI Pru's NBP grew by 71% YoY, and VNB grew by 78%, while SBI Life's NBP and VNB grew by 9% and 45%, respectively.

Weak Bottom Line

While the pandemic renewed the awareness about the importance of life insurance, people bought more policies. However, it didn't translate into a strong bottom line as the number of claims increased during the second COVID-19 wave.

In the quarter gone by, the number of claims went up around 3-4x in comparison to the first wave. The insurers were also forced to raise provisions levels considering the possibility of a third wave. As a result, profits tanked sharply for HDFC Life and SBI Life. ICICI Prudential had to book a loss for the quarter.

Closing Comment

The life insurance sector has a huge growth runway available to them. And the good thing is, the pandemic has finally made people realise the importance of protecting their loved ones.

Increased death claims have certainly impacted their profitability. However, these companies are financially strong, and if they manage to scrape through this period, short-term results shouldn't matter in the larger scheme of things.

(To receive our E-paper on whatsapp daily, please click here. We permit sharing of the paper's PDF on WhatsApp and other social media platforms.)

Published on: Thursday, July 29, 2021, 07:12 PM IST