Life insurance firms hit speed breaker

Growth is set to drop to 40-60% this year from 75%

KOLKATA: Private life insurers players are expected to grow their new business premium by 40-60% in the current financial year, down from a 75% growth registered in the previous year.



The slump in equity markets since January (the Sensex has fallen 27% from its peak on January 8, 2008) has dented the popularity of unit linked investment plans (Ulips), which form the chunk of life insurance policies sold in India.



Punit Srivastava and Sumit Agarwal of Enam India Research said in a recent report: “There are some key risks as most policies are unit linked with high equity component. Sustained bearishness in capital markets can further reduce persistency ratios, thereby putting pressure on profitability. We estimate private players to grow at a lower 27% over the next couple of years vs~100% for the past 5 years”.



A Motilal Oswal Research report also has a cautious take on the life insurance sector. “We estimate 35-45% growth in annualised premium over the next two years for large and medium private players, lower than half of their historical growth rates”, the report said.