Growth in pvt life insurers' new business slows down

Tax on policies with over ₹5-lakh premium dents buyer interest

- MITHUN DASGUPTA

THE VALUE OF new business (VNB) for private sector life insurers in the first quarter of FY24 seems to be in the slow lane.

For example, SBI Life Insurance and ICICI Prudential Life Insurance witnessed a fall of 1% and 7%, respectively, in their VNB in the first quarter of FY24 on a year-on-year (YoY) basis. While HDFC Life Insurance reported a growth of 18%, the percentage increase on a YoY basis was lower than Q1FY23, at 25%. In addition, for the life insurance major, the VNB margin in the first quarter was lower than the company's full-year guidance as well.

The numbers are significantly lower than the trend seen the last five years. That is, the VNB compound annual growth rate (CAGR) over the past five financial years (FY18-23) for most large private sector players has been closer to 30% versus sub 20% five years ago.

Macquarie Equity Research feels that VNB margins of the private life insurance companies have more or less peaked. Additionally, another dampener for life insurers has been the new tax liability on policies with over ₹5 lakh premium. This is quite likely to have reduced investor interest in such policies and have an adverse impact on the purchase of new policies for tax-saving purposes.