The materially slow growth in sum assured from individual new business vs. premium growth very clearly reflects the slowdown in Retail Protection volumes due to the demand impact stemming from price hikes and supply-side issues which limited insurers from underwriting retail term policies in H1FY22.
The strong growth in Group Term Insurance (GTI) premium (+82% YoY) vs. 17% YoY growth in Sum Assured reflected strong price hikes in the GTI business.
Going forward, with the interest rate cycle reversing, volatile equity markets, high inflation and the return of postponed discretionary consumption will mean that middle-class household savings will be under pressure, leading to some pressure on the life insurance savings business.
Relatively speaking, the large private players, equipped with their superior brands and distribution networks and employing their agile and innovative approaches, are well-poised for strong growth and to increase their market share.
The change in the new business product mix in FY22 has been shaped by a combination of external factors, including a sustained low-interest-rate environment, buoyant equity markets in H1FY22 and Covid-19-led dislocations (additional savings to be deployed by the upper-middle class and affluent class, but clipped savings ability of masses). These external factors, along with changing customer preferences, have driven the changes in the new business mix toward ULIP, non-par savings, and pension products.
Strong equity markets and increased savings of the affluent class and white-collared youth with higher risk appetite meant that ULIPs delivered strong growth in Retail APE in 9MFY22 (+50% YoY). However, the growth in ULIP APE materially slowed down to +8% YoY in Q4, taking FY22 growth to 33% YoY.
Non-par (savings and protection) continued to grow sustainably despite the slowdown in the non-par protection part, with its share in individual APE increasing to 23% in FY22 from 18% in FY20.
