One of the devastating impacts of COVID-19 was the increased health & hospital expenditure for lakhs of families across the country. This impact was more pronounced in the case of those without a health insurance policy. This impact seems to have driven a lot more people to opt for health insurance in 2020-21 if data is to be believed. Most non-life insurance companies reported a significant increase in the number of new Health Insurance Policies during 2020-21.
In an earlier story, we had observed that there is a 36% increase in the amount of Life Insurance claims due to death, during the first three quarters of 2020-21. The increasing trend in the value of insurance claims due to death was seen across public & private insurers. At the same time, it was observed that the health insurance claims had reduced in the first three quarters of 2020-21 compared to that of the previous year. While there could be multiple factors influencing these trends, COVID-19 certainly played a huge role. In this story, we look at the trends in Insurance premiums paid with respect to Life insurance & health insurance in 2020-21 compared to the previous years to understand if premiums and the number of new policies have been influenced by COVID-19.
Lower growth of Life Insurance Premium earned during 2020-21 across major insurance companies
As per the Public Disclosure by various Insurance companies and data available on the IRDAI (Insurance Regulatory & Development Authority of India) website, the total Life Insurance premium earned by the major Life Insurance companies in India has continued with the increasing trend even during 2020-21. However, the growth rate has slowed down compared to the earlier years.
As per the information provided by LIC, which is the largest Life Insurance provider in the country, the total premium earned during 2020-21 amounted to Rs. 4.03 lakh crores, an increase of 6.3 % compared to 2019-20. This is less than the 12.4% growth reported in 2019-20 which was an exceptional year. The growth rate in the earlier years also hovered around 6%.
Apart from LIC which is a Public Sector insurer, most of the other major Private sector insurance companies have reported a similar trend in their earnings through Life Insurance Premiums.
- The growth rate of ICICI prudential also reduced. Overall earnings through Life-Insurance premium were Rs. 35.7 thousand crores in 2020-21, an increase of around 6.9%, slightly less than the 8.09% reported in 2019-20.
- Kotak Mahindra which reported an increasing trend of growth rate prior to 2020-21, also reported a slowdown in 2020-21. Not much variance is observed in the case of SBI Life.
- On the contrary, HDFC Standard & Aditya Birla Sun-Life which are among the top five private life insurers reported an increase in the growth rate of premium earnings during 2020-21.
The trend over the past few years shows that the growth rate of premium earnings has fluctuated. It also ought to be noted that a large share of the insurance premiums paid would be renewals. The trends in renewals and new insurance premiums could offer more insights into the influence of the COVID-19 pandemic. With the available data, it is difficult to ascertain whether the COVID-19 pandemic had an impact on these trends.
41% fall in the amount of Premium earned through new subscribers for LIC
Out of the Rs. 4.03 lakh crores of Life Insurance premium earned by LIC in 2020-21, nearly Rs. 2.19 lakh crores are through renewals. This is an increase of around 18 thousand crores compared to the 2.01 lakh crores in 2019-20. Similarly, there is an increase in the revenue earned through ‘Single Premium’ i.e., Policies with one-time Payment. However, in the case of first-year premiums i.e., the premium for new policies taken during the year, there is a fall reported during 2020-21. A total of Rs. 33.93 thousand crores were earned through first-year premiums in 2020-21 compared to nearly Rs. 58 thousand crores during 2019-20. A review of the earlier years shows that there has been an increasing trend in the years before 2020-21, in terms of revenue earned through first-year premiums.
Among the leading Private Life Insurers, ICICI Prudential has reported a fall in the revenue earned through first-year Premiums. Meanwhile, there is a slight increase in the revenues through first-year premiums for other leading Private insurers like – SBI Life, Aditya Birla Sun Life & Kotak Mahindra. But the growth during 2020-21 has been lower when compared to the previous years.
In the case of revenue earned through policy renewals, there has been an increase across all the top insurers. Single Premiums, which as in the case of first-year premiums point towards new insurance policy subscriptions, have seen an increase for all the leading Life Insurance companies.
The number of new individual policies falls in the case of LIC & ICICI Prudential
The fall in the revenue earned through first-year premiums for LIC is reflected in the fall of new individual insurance policies for 2020-21. Around 2.09 crore new LIC life Insurance policies were subscribed to in 2020-21 compared to 2.18 crore policies the previous year. This is as per the Business Acquisition details provided as part of Public Disclosure.
A steeper decline is seen in the case of ICICI Prudential where the number of new individuals policies subscribed fell to 6.62 lakhs in 2020-21 compared to 7.65 lakhs in 2019-20. This correlates with the fall in the revenue of ICICI prudential through first-year premiums. Aditya Birla Sun-life also reported a minor fall in 2020-21. In the case of both these private insurers, the declining trend is seen even in the earlier years.
In contrast, other larger insurers i.e., SBI Life, HDFC Standard & Kotak Mahindra have reported an increase in the number of policies being subscribed to though their number is quite small compared to LIC.
Increase in the Number of Health Policies during FY 2020-21
As per the public disclosure by Non-Life Insurers, there is a general increasing trend in the number of new Health Insurance policies during 2020-21 across the major non-life insurers.
New India Assurance reported around 19.11 lakh new health insurance policies during 2020-21 compared to 17.09 lakh in the previous year. On the contrary, the new health insurance policies in the case of National Insurance reduced to 15.11 lakhs in 2020-21 from 15.55 lakhs in 2019-20. However, this is in continuation of a declining trend from the earlier year.
Star Health, which is among the insurers with the most subscribers reported 63.98 lakh new Health insurance policies in 2020-21 compared to 44.63 lakhs in 2019-20. Other large insurers, Religare (Care health) & Oriental Insurance have also reported an increase. In particular, Oriental insurance reported a steep increase of more than 100% in the number of new health insurance policies. The information for United India Insurance, which is among the top two is not yet available.
The increase in new Health Insurance policies may be linked to the Pandemic while the no-major impact on Life Insurance
The trend in Life Insurance policies does not show any particular impact of COVID-19. The slower rate of growth seen in the case of few insurance companies was also observed in the earlier years. Hence the slow growth rate cannot be specifically linked to the COVID-19 pandemic since the difference in growth is only marginal.
It could also be a case of change in preference for non-public insurers i.e., there has been an increase in the new subscribers for private insurers compared to LIC. However, the volumes of LIC far outweigh the other insurers. In other words, the difference is too small to draw any meaningful conclusion.
The financial position of the population in the aftermath of COVID-19 could also be a factor. However, it is still too early to comment on any definitive trend in the case of life insurance since the pandemic is still an ongoing event.
In contrast, there is a clear preference for taking new Health Insurance policies. The trend among the large non-life insurers reflects this trend. In this case, it could be clearly concluded that the impact of COVID-19 in terms of health expenditure has pushed a greater population to opt for health insurance. The complete data from all the insurers for the first two quarters of 2021-22 will be key to understand if this trend sustains.
Featured Image: Increase in Health Insurance Policies during 2020-21