Life and non-life insurance activities affected by COVID; Health insurance policies see strong growth: SBI


The COVID-19 pandemic affected both life and non-life insurance business in FY21 and FY22. However, health insurance policies jumped massively in the same period, according to a report by research.

In the report, the State Bank of India (SBI) says: “The pandemic has sensitized people not only on the indispensability of a health insurance policy but also on the need to have adequate coverage, better features and transparent services. Awareness has led more people to buy new policies or transfer to insurers that offer better coverage and claims settlement.”

In FY21, retail health insurance policies recorded a massive jump of 28.5% to Rs 26,301 crore and continued to grow in FY22. From April 2021 to January 2022, the health insurance portfolio of insurers increased by 25.9%, with an increase in consumer health contracts by 17.28% and group contracts by 30.1%.

“Insurance has evolved rapidly with changing needs, and today’s generation is looking for products that are personalized and designed for them. So there is a need for product innovation to bring more people under cover. insurance,” says Dr. Soumya Kanti. Ghosh, chief economic adviser of the SBI group.

According to the report, India’s insurance sector has shown resilience in the face of the COVID-19 pandemic, with premium decline smoother and recovery faster. In particular, life insurance was affected in FY21 and FY22 due to the COVID-19 pandemic, which limited movement due to lockdowns, as the insurance business relies primarily on the performance of officers.

After muted issuance in December 2021 and January 2022 due to the third wave of the COVID-19 pandemic, life insurance companies recorded impressive new business premium (NBP) growth in February, driven mainly by the initial public offering (IPO) linked to Life Insurance Corp (LIC) of India’s NBP surge over the same period, fueled by a 40% growth in collective single premiums. Life insurers’ NBP rose 22.47% year-on-year (YoY) to Rs 27,464.76 crore in February, with LIC’s NBP jumping 35.4% to 17,849 .34 crore rupees and private insurers reporting growth of 5% to 9,975 crore rupees.

Premiums for non-life insurers fell after rising for two consecutive months as sales fell across all categories, with the crop protection business the worst hit. The industry’s revenue or gross premiums written declined by 22.6% from the previous month to reach Rs 16,561 crore in February 2022. Meanwhile, year-on-year growth recorded 5% and 20 % more than the corresponding pre-pandemic period in 2020.

According to the SBI report, in FY21, death claims paid by the life insurance industry increased by 40.8% to Rs 41,958 crore. In the case of individual life business, in 2020-21, life insurers paid 10.84 lakh claims, with a total claim amount of Rs26,422 crore, a growth of 46.4%. Death claims ticket amount increased to Rs2.44 lakh in FY21 from Rs2.13 lakh in FY20. deaths from COVID-19, he says.

Talking about preferred distribution channels for insurance business, the report reveals that private insurers prefer bancassurance mode, while LIC business depends on individual agents.

“Despite digitization, the share of policies sold via online and web aggregators amounts to 1.9% in terms of premium value and around 1.6% in terms of number of policies. growth is “bancassurance”, in which the share of premium collections increased to 29% in FY21 from 16.6% in FY14. However, in the case of private insurers, the share of bancassurance is around 55%, while LICs rely mainly on “individual agents”.The share of individual agents has decreased and stands at 58% at the overall sector level in terms of life insurers, around 23% for private insurers and 94% for LICs,” says SBI.

However, reports point out that brokers play a huge role in the non-life insurance industry. Brokers’ contribution to total non-life insurance premiums increased from 21.9% in FY14 to 31.4% in FY21. At the same time, the share of corporate agent banks and individual agents in non-life insurance business is declining.

According to SBI, “This may be due to low commission from agents or banks and better support in claims settlement from brokers like car dealerships and hospitals.”

According to the report, one in three life insurance policies in India are sold to women. The number of policies issued to women in FY21 is around 93 lakh representing a share of 33% compared to a share of 32.23% in 2019-20. The proportion of policies on women in the case of private life insurers is 27% and that of LICs is 35%. In 19 states and union territories (UT), the share of the number of policies purchased by women out of the total policies sold is higher than the India-wide average of 33%.

SBI also recommends certain measures to increase insurance penetration across India. This includes reducing the Goods and Services Tax (GST) levied on premiums and introducing standardized products for various sectors to reduce the protection gap.

Currently, all insurance policies are taxed at 18% GST. “A reduction in premiums will go a long way towards building a secure nation where every household has the ability to weather the financial stress caused by unforeseen life events. Additionally, in India, insurance penetration is low; the introduction of tax in the insurance field may not represent the best step forward After the effect of the COVID 19 pandemic on the economy, it seems like the right time to reduce the GST rate to 5% or a ‘zero’ rate on life, health and term insurance to cover India’s maximum population,” says SBI.

According to Dr. Ghosh, the government can further improve insurance penetration by providing livelihood security through the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA).

“Although MGNREGA has provided livelihood security, we are offering compulsory registration of MGNREGA workers at Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) and Pradhan Mantri Suraksha Bima Yojana (PMSBY) for a payment of only Rs342 (Rs330 + Rs12), which can be purchased Since only 10% of households or individuals have completed 100 days of work, the cost of compulsory registration is only 400 to 500 million rupees which can be borne by the government assuming that in FY22, approximately 12 to 13 crores of individuals will work under MGNREGA,” he says.

In India, the overall protection gap across all segments, life and non-life, is around 70-80%. In other words, only 20% to 30% are availed of any type of insurance.

According to the SBI, “to quickly close the protection gap, according to Jan Suraksha, the Union government should come up with standardized products for various sectors so that the protection gap in each segment can be narrowed significantly. ”

For example, considering the 2020 floods in India, the total economic loss was $7.5 billion or around Rs52,500 crore but the insurance only 11%. “If the Union government had insured it, then the premium for the insurance sum of Rs60,000 crore would have (been) only in the range of Rs13,000 to Rs15,000 crore, thus enabling the government to save at least Rs40,000 crore!” said Dr. Ghosh.


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