Life insurers' assets growth not in sync with premium pace

MUMBAI: Life insurance companies’ assets growth has not kept pace with the total premium growth. In contrast, pension funds’ assets have grown at a much faster pace than pension premium.

Figures released by the Life Insurance Council, an association of Indian life insurers, show that total insurance premium — new and renewal — of life insurance companies jumped 54% in FY07 from Rs 99,360 crore to Rs 1,53,000 crore.

In absolute terms, the premium, this year, was Rs 53,640 crore, higher than the premium income last year. However, assets managed by these companies grew only 9.2% to Rs 6,00,130 crore — an absolute growth of Rs 50,576 crore. The slower growth is probably a result of life companies selling short-term policies which result in their portfolio being churned.

However, since July 2006, new guidelines came into force which prevent life companies from selling short-term policies and lock-in policyholders for, at least, three years. Last year (06-07), a spurt in sales of unit-linked pension plans (Ulips) by Life Insurance Corporation, which has a 75% overall market share, saw a spike in sales of pension plans.

At an insurance CEO roundtable of life companies indicated that the industry would see high levels of growth in coming years. According to Aviva Life Insurance managing director Bert Patterson, there is a growing realisation that one can no longer rely on government for providing social security and this is going to drive the growth of the industry. Insurers are factoring in the high potential for growth into their current year’s business plans.

HDFC Standard Life MD and CEO Deepak Satwalekar said that his company is targeting a 100% growth this year compared with the 80% it achieved last year. For this, they have also increased the number of agents from 73,000 in April 2007 to 89,000 as of now. And the company is looking at a capital infusion of Rs 200 crore.

However, ICICI Prudential Life Insurance MD Shikha Sharma said that the sharp growth achieved last year may not be easy to sustain. “We are in the early part of the ‘J’ curve and the steep growth may have been an aberration.” Acknowledging the strong growth in life premium, Life Insurance Council chairman SV Mony said that one of the challenges facing the industry is managing the high growth.