Life Insurance Sector Bottomline Dips 8.4% in FY20

LIC shows modest rise, rest 23 cover companies record 12.7% fall in total net profit

Life Insurance Sector Bottomline Dips 8.4% in FY20
Life Insurance Sector Bottomline Dips 8.4% in FY20
PTI - 11 February 2021

The life insurance industry registered a decline of 8.4 per cent in net profit at Rs 7,728.30 crore in 2019-20, according to sector watchdog Insurance Regulatory and Development Authority of India (Irdai) annual report.

The 24 life insurance companies had posted a post-tax profit of Rs 8,435.81 crore in 2018-19. “During the financial year 2019-20, the life insurance industry reported a profit after tax of Rs 7,728 crore as against Rs 8,436 crore in 2018-19. Out of the 24 life insurers in operation during the year, 17 companies reported profits,” says the document.

Life Insurance Corporation, the state-run cover company, registered a modest increase of 0.9 per cent in net profit at Rs 2,712.71 crore during the year as against Rs 2,688.50 crore in the preceding fiscal.

The remaining 23 private sector players registered a decline of 12.7 per cent in their collective net profit at Rs 5,015.59 crore as against Rs 5,747.31 crore in FY19.

Irdai says the investment income, excluding dividend distribution tax, of all the life insurers during the year was down by 18 per cent to Rs 2.34 lakh crore. LIC’s investment income grew 6 per cent to Rs 2.37 lakh crore.

On the other hand, the private sector companies incurred losses with investment income, including the negative movement in the fair value of unit linked assets, coming in at (-) Rs 3,105.97 crore. The investment income stood at Rs 61,158.07 crore in 2018-19.

During the year 2019-20, LIC proposed Rs 2,698 crore as dividend to the Government of India (shareholder), as against Rs 2,661 crore in 2018-19.

Six private life insurers – ICICI Prudential, Max Life, Shriram Life, Bajaj Allianz, Star Union Dai-ichi Life and IDBI Federal Life – paid/proposed dividends of Rs 1,216 crore, down from Rs 1,781.26 crore a year ago.

In total, the dividend paid by the life insurers stood at Rs 3,913.49 crore in FY20, down by 11.9 per cent from Rs 4,441.86 crore a year ago.

Irdai said Sahara India Life Insurance had declared a dividend of Rs 23.20 crore for FY18-19, which was cancelled on the directions of the Authority.

With regard to death claims, the insurers settled as many as 8,74,849 claims, with a claim settlement ratio of 96.76 per cent. While LIC settled 7,58,916 claims (96.69 per cent), the collective settlement by the remaining private sector players was 1,15,933 (97.18 per cent).

The regulator says that during the first decade of insurance sector liberalisation, the sector reported an increase in insurance penetration from 2.71 per cent in 2001 to 5.20 per cent in 2009. Insurance penetration is measured as the percentage of insurance premium to GDP.

“Since then, the level of penetration was declining and reached 3.30 per cent in 2014. However, the insurance penetration started increasing again from 2015 and, in 2019, penetration was 3.76 per cent,” the annual report says.

Insurance density, which is calculated as the ratio of premium to population (per capita premium), has reported a consistent increase from $11.5 in 2001 to $64.4 in 2010. The level of density declined up to 2016 but reversed from 2017 and, in 2019, the insurance density was $78, the regulator says.

Measure of insurance penetration and density reflects the level of development of insurance sector in a country.