LIC Witnessed Marginal Growth in Renewals

Life Insurance Corporation of India (LIC) has witnessed a marginal increase in renewal premiums but it has witnessed a sharp fall in premium collection from single premium policies.

During 2011-12, LIC’s renewal premium collection stood at Rs 1, 21,027 crores as against Rs 1, 16,461 crores in 2010-11, which is the growth of 4%.

An analysis of 11 large private life insurers had revealed that their renewals have increased by 6% in FY’12.

Premium collection of LIC from single premium policies declined by 18% to Rs 41,667 crores in FY’12 from Rs 50,747 crores in FY’11.

First year premium collection of LIC in FY’12 increased by 11% to Rs 40,194 crores as against Rs 36,265 crores in FY’11.

Total premium collection of LIC, which includes renewal premiums, single premiums and first year premiums decreased marginally to Rs 2, 02,889 crores in FY’12 as against Rs 2, 03,473 crores in FY’11.

Persistency ratio, which indicates the percentage of policies that are active, rather than lapsed, also shows that LIC has improved on renewals. Thirteen-month persistency of LIC has gone up to 67% in FY’12, from 64% in FY’11. Similarly, 25-month persistency has also improved to 64% in FY’12 from 58% in FY’11.

The average thirteen-month persistency of eight private large life insurers for FY’12 was around 68% and 25-month persistency was around 73%.

For LIC, individual agents continued to be the dominant sales channel, with about 99.2% of commission income being earned by them. Commission paid by LIC to individual agents increased by 5.3% in FY’12 to Rs 13,956 crores as against Rs 13,252 crores in FY’11.

LIC has also increased focus on bank partners to sell insurance policies. During FY’12 LIC paid Rs 70 crores to bank partners as commission as against Rs 53 crores in FY’11, a growth of 32%. Consequently, portion of commission paid to banks has increased to 0.5% during FY’12 compared to 0.4% during FY’11.

In FY’12, total commission disbursement by LIC has also increased by 5.4% to Rs 14,063 crores from Rs 13,347 crores in FY’11.

An analysis of eight large private life insurers had revealed that, although commissions given to various distribution channels has decreased by 7.25%, commissions paid to insurance brokers increased by 13.34% in FY’12.