Private insurers take a premium hit

MUMBAI: After several years of high growth, private insurance companies appear to have hit a rough patch. The insurance sector also appears to be feeling the pain that has afflicted rest of the markets. There has been a considerable decline in new premiums payments in October. Industry observers say that the dip in renewals or new premiums payments will continue to slow down over the next couple of months as well.

Insurance premiums in October rose by just 12%, and many private insurance companies, for the first time in 20 months, did not see growth in triple digits. In fact, premium growth in October declined 25% from the previous month.

Rajiv Jamkhedkar, CEO of Aegon Religare Life Insurance, sees a slowdown in the sector compared to the ���heady growth over the past few years���. He said, ���By and large, there has been a definite slowdown in the financial sector and the economy. The next fiscal also is unlikely to see high levels of growth.��� Though the numbers for the month of November haven���t been released by the insurance regulator ��� IRDA, but there are indications that growth in premiums will see a further decline. ���October has been slow and November will also be relatively slow,��� said Rajesh Sud, deputy MD, Max New York Life.

But insurers are pinning their hopes on a strong growth in the last quarter. ���The next quarter is going to be crucial. We normally see a pick up in new premiums in the last quarter of every year,��� Mr Sud remarked. Around 40% of annual insurance sales happen in the last quarter of each year. This is because most people put off their insurance payments till the last quarter.

One argument that is also being made is that the slowdown in growth could be the result of a larger base. However, many individuals are preferring not to lock money in insurance policies, and are instead placing their money in debt funds and fixed deposits offered by banks and mutual funds.