The first-year premium income of the life insurance sector increased 9.7% to Rs 26838.29 crore in December 2022. The private life insurers reported 14.9% growth in the premium collection at Rs 14979.79 crore, while Life Insurance Corporation (LIC) showed 3.7% rise to Rs 11858.50 crore in December 2022. During April-December FY2023, the private insurers reported 17.6% increase in the first-year premium income to Rs 93188.83 crore, and LIC posted 39.7% rise to Rs 176001.77 crore. The overall life insurance first year premium collection rose 31.2% to Rs 269190.60 crore in April-December FY2023. Among the 22 private life insurers, 8 players have recorded drop in new premium collection during December 2022. On the other hand, premium collection of 14 private insurers increased in the range of 0.4% to 440.1% in December 2022. The life insurers sold 27.54 lakh policies in December 2022, registering a decline of 7.6% compared over December 2021. The private players together posted 5.9% rise to 8.84 lakh policies, while the policies sold by LIC declined 12.9% to 18.70 lakh policies.

Life insurers have sold 183.90 lakh policies in April-December FY2023, showing a jump of 4.3% against last year. The sales of policies from LIC surged 1.9% to 129.16 lakh policies, while all private players together sold 54.74 lakh policies, recording a rise of 10.4%.

The Gross premium underwritten by non-life insurers (including specialized PSU insurers), increased 14.5% to Rs 21872 crore in December 2022 against December 2021. General Insurers reported an increase of 13.5% in premium collection to Rs 18280 crore in December 2022, while Stand-alone Private Health Insurers posted 22.7% surge to Rs 2308 crore in December 2022. Specialised PSU insurers have recorded 15.7% increase in premium collection to Rs 1284 crore in December 2022. The non-life insurance sector reported 16.2% rise in the premium collection to Rs 187232 crore in April-December FY2023.

Industry Expectations:

Enhanced deduction of Life Insurance Premium: Section 80C of the Act basically provides for a deduction up to Rs 150,000 for investments made in various savings instruments such as mutual funds, bank deposits along with long term savings in life insurance plans, pension plans, etc. Various other expenditures like tuition fees etc have also been included. Due to such inclusion, share of investment for allowable deduction is reduced to large extent. In order to encourage growth in the life insurance segment it is recommended that the Government should increase the limit of deduction for life insurance premium/by creating a separate limit for deductibility of life insurance premium. Increase in tax incentives for insurance products like Term plan, Health etc will result higher demand for insurance products which can be positive for insurance companies.

Rationalization of limits for investments of insurance companies: Insurers have restrictions on investment in capital markets and overseas securities, so the returns generated are not competitive. Union Budget 2023-24 may relax these investment norms enabling insurance companies to generate better returns for policyholders.

Increase tax exemption limit for health insurance: An increase in tax exemption limit for health insurance segment would benefit the sector. The waiver of service tax on health insurance premium would be positive for insurance industry. The government may also announce more tax incentives to facilitate people to buy adequate health insurance which has gained significance amid pandemic.

Parity between Mutual Funds and Insurance: The budget may remove tax arbitrage between mutual funds and insurance in terms of switching, STT and capital gains. If implemented, this could be negative for the insurance sector and positive for the AMC sector.

Roadmap on corporate tax rate on life Insurance companies: The government may hike tax rate for insurance companies and provide some details on the timelines of tax rate increase on life insurance companies. It will be overall negative for life insurance businesses operating at lower tax rates. An increase in tax rate from current 15% will impact EV and VNB of life insurers.

Exemption of insurance policies from GST: After the implementation of GST, the prices of insurance products have gone up. Abolition of GST will give a strong boost. Life insurance penetration is low in India and GST of 18% on insurance premium is a drag.

Roadmap for consolidation of PSU general insurance companies: There could be potential announcement around roadmap of consolidation of PSU general, which will be positive helping to build efficiencies.

Key stocks to watch

ICICI Prudential Life Insurance, HDFC Standard Life Insurance, SBI Life Insurance, New India Assurance, General Insurance Corporation

Outlook

The insurance penetration in India is improving, but still remains substantially lower compared with other leading countries. The insurance industry has continued to demand separate limit of deduction for life insurance premium. There is a need for providing further impetus to life insurance companies for enhancing the insurance penetration in the country. In the general insurance segment, the announcement on capital allocation and consolidation of public sector general insurers is likely in the budget. The government may also announce more tax incentives to facilitate people to buy adequate health insurance which has gained significance amid pandemic.