The Indian life insurance industry seems to be returning
to the growth path
Life insurance industry
recorded a premium income
of Rs 3,66,943.23 crore during
2015-16 as against Rs 3,28,102
crore in the previous financial
year registering growth of 11.84
per cent (4.39 per cent growth
in previous year). While private sector
insurers posted 13.64 per cent growth
(14.32 percent growth in previous year)
in their premium income, LIC recorded
11.17 per cent growth (1.15per cent
growth in previous year).
While renewal premium accounted
for 62.16 per cent (65.46 per cent in
2014-15) of the total premium received
by the life insurers, first year premium
contributed the remaining 37.84
per cent (34.54 percent in 2014-15).
During 2015-16, the growth in renewal
premium was 6.20 per cent (10.72 per
cent in 2014-15).
First year premium registered a growth
of 22.53 per cent in comparison to a
decline of 5.81 per cent during 2014-15.
Further bifurcation of the first year
premium indicates that single premium
income received by the life insurers
recorded a positive growth of 32.52
percent during 2015-16 (2.37per cent
decline in 2014-15).
Single premium products continue
to play a major role for LIC as they
contributed 27.80 percent of LIC’s
total premium income (23.11 per cent
In comparison, the contribution
of single premium income in total
premium income during 2015-16 was
13.75 percent for private insurance
companies (12.35 percent in 2014-15).
The regular premium registered 8.43
percent growth in 2015-16, as against
10.28 per cent decline in 2014-15.
The private insurers registered a
growth of 7.92 per cent with a good
improvement (against a decline of 9.79
per cent in 2014-15) in the number of
new policies issued against the previous
year, LIC registered a slight growth of
1.86 per cent with a significant
improvement (against a decline
of 41.55 per cent in 2014-15)
in the number of new policies
Overall, the industry witnessed
a 3.20 per cent growth (against
the decline of 36.61 per cent decline in
2014-15) in the number of new policies
The total capital of the life insurance
companies as on 31st March, 2016
was Rs 26,691.47crore. During 2015-
16, an additional capital of Rs 451.91
crore was brought in the industry by the
private sector insurers.
Expenses of life insurers
Pursuant to Insurance Laws
(Amendment) Act, 2015, section 40B
of Insurance Act, 1938 was amended
and reads as under: “No insurer shall, in
respect of insurance business transacted
by him in India, spend as expenses of
management in any financial year any
amount exceeding the amount as may
be specified by the regulations made
under this Act.”
Accordingly, IRDAI (Expenses of
Management of Insurers transacting
life insurance business) Regulations,
2016 were notified vide F.No. IRDAI/
Reg/14/126/2016 on 9th May 2016.
These Regulations prescribes the
allowable limits of expenses of
management taking into account,inter
alia the type and nature of product,
Further, for the financial year 2015-16,
Indian insurers have the option either
to comply with these Regulations or
with the erstwhile provisions under
Rule 17D of the Insurance Rules, 1939.
The overall commission expenses ratio
(commission expenses as a percentage
of premiums) decreased marginally to
5.52 per cent in 2015-16 from 5.93 per
cent in 2014-15.
However,total commission increased
by 4.14 percent (total premium growth
11.84 percent), regular commission.
increased by 5.25 percent (regular
premium growth 8.43 percent),first
year commission increased by 5.00
percent (first year premium growth
22.53 percent) and renewal commission
increased by 3.31percent (renewal
premium growth 6.20 percent).
The single premium has increased by
32.52 percent but there has been a fall
in single premium commission by 2.65
However, there is some variation in the
position when compared between the
private insurers and LIC.
The operating expenses of the life
insurers decreased by 1.61 per cent in
2014-15 but increased by 5.22 per cent
in 2015-16. The operating expenses
towards life insurance business stood
at Rs 36,859.16 crore in 2014-15 and
increased to Rs 38783.09 crore in 2015-
The operating expenses of LIC increased
by 1.32 percent and that of private
insurers by 11.25 percent. For the
life insurance industry, the operating
expenses ratio (the ratio of operating
expenses to the premium underwritten)
decreased from 11.23 per cent in 2014-
15 to 10.57 percent in 2015-16.
Operating expenses, as a per cent of
gross premium underwritten decreased
for LIC from 9.34 per cent in 2014-15
to 8.52 per cent in 2015-16. The same
for private insurers decreased from
16.36 percent in 2014-15 to 16.01
percent in 2015-16.
The life industry paid benefits of
Rs 20,1766.10 crore in 2015-16
(Rs 21,0915.03 crore in 2014-15)
constitutes 54.99 per cent of the gross
premium underwritten (64.28 per
cent in 2014-15). The benefits paid by
the private insurers was Rs 60,565.05
crore (`Rs 66,789.28 crore in 2014-
15) constituting 60.26 per cent of the
premium underwritten (75.52 per cent
LIC paid benefits of Rs 141201.05
crore in 2015-16, constituting 52.99
per cent of the premium underwritten
(Rs 144125.75 crore in 2014-15, 60.14
percent of the premium underwritten).
The benefits paid on account of
surrenders / withdrawals decreased
at Rs 80356.75 crore, of which LIC
accounted for Rs 37292.24 crore and
private sector Rs 43064.51crore.
The comparative previous year statistics
were Rs 100389.57crore, of which LIC
accounted for Rs 46537.61crore and
private sector paid Rs 53851.96crore. In
the current year, in case of LIC, out of
the Rs 37292.24 crore surrenders, ULIP
policies accounted for Rs 8960.57crore
(24.03 percent)as against Rs 23224.49
crore, (49.90 percent) in 2014-15. In
case of the private insurance industry,
the ULIP surrenders accounted for
Rs 37489.04crore (87.05 percent) in
2015-16 as against Rs 48724.32 crore
(90.48 per cent) in 2014-15.
Death Claims for the year 2015-16
Individual Life Insurance Business:
In the year 2015-16, the life insurance
companies had settled 8.54 lakh claims
on individual policies, with a total
payout of ` Rs12,636.66 crore.
.The number of claims repudiated/
rejected was 15,157 for an amount of
Rs 736.51 crore. The number of claims
pending at the year-end was 6,031 and
the amount involved was Rs 4,44.23
crore. Of these,1189 claims were
pending for more than one year and
4,842 claims were pending for less than
and up to one year.
The claim settlement ratio of LIC
was better than that of the private
life insurers. Settlement ratio of LIC
had increased to 98.33 percent during
the year 2015-16 when compared to
98.19 percent during the previous year.
The percentage of repudiations has
come down to 0.98 percent in 2015-
16 compared to the 1.15 percent in
For private insurers, settlement ratio
had gone up by 2.08% at 91.48 percent
during the financial year 2015-16 when
compared to 89.40 percent during
the previous year. The percentage of
repudiations has come down to 6.67%
in the year 2015-16 compared to the
7.78% percent in previous year.
The industry’s settlement ratio had
slightly increased to 97.43 percent in
2015-16 from 96.97 percent in 2014-15
and the repudiation ratio had decreased
to 1.73% compared to the 2.08 percent
Group Life Insurance
During 2015-16, the total intimated
claims were 5,45,337 while 14,388
claims were pending at the beginning
of the year. Out of these, life insurance
industry had settled a total of 5,28,638
(96.94% of the total claims) claims.
96.28% of the settled claims were
settled within 30 days of intimation.
0.01% of the claims took more than a
year to get settled.
Group Death claims pending for more
than one year with respect to the Future
Generali Life Insurance Company
(12414) as at 31.03.2016 accounts for
96.23 per cent of total Life Industry’s
Group Claims pending for more than
one year (12900) as at 31.03.2016.
Barring Future Generali’s pending
claims, pending claims of all other
insurers put together comes at 486.
Out of the 12414 pending group death
claims of Future Generali Life.
Insurance Company, 12371 are under
litigation and are subjudice.
While LIC settled 99.69 percent of
the claims, the private life insurers paid
94.65 percent of all claims. The industry
repudiated 0.53 percent of the claims,
written back zero percent of the claims
and the remaining 2.53 percent of the
claims were pending as at 31.3.2016.
In the case of LIC, the investment
income including capital gains was
Rs 1,57, 961.30 crore Rs 1,68,063.58
crore in 2014-15). In the case of private
insurance industry, the investment
income including capital gains was
at Rs13,078.73 crore in 2015-16 (Rs
78,650.52 crore in 2014-15).
During 2015-16, Rs 218.82 crore
was ceded as reinsurance premium by
LIC (`Rs 184.88 crore in 2014-15).
The private insurers together ceded Rs
1284.32 crore (Rs 991.92 crore in 2014-
15) as premium towards reinsurance.
Profits of Life Insurers
During the financial year 2015-16,
the life insurance industry reported
a profit after tax of Rs 7,414.97 crore
as against Rs 7611.31 crore in 2014-
15. Out of twenty-four life insurers in
operations during 2015-16, nineteen
companies reported profits. They are
AvivaLife, Bajaj Allianz, Birla SunLife,
Canara HSBC, DHFL Pramerica,
EXIDE Life, HDFC Standard, ICICI
Prudential, IDBI Federal,India First,
Kotak Mahindra, Max Life, PNB
MetLife,Sahara India, SBI Life, Shriram
Life, Star Union, Tata AIA and LIC of
LIC of India reported a profit after tax of
Rs 2517.85 crore i.e. an increase of 38.06
percent over Rs 1823.78 crore in 2014-15.
Returns to Shareholders
For the year 2015-16, LIC paid Rs
2497.03 crore ( Rs 1803.05 crore in
2014-15) as dividends to Government
of India. Four private life insurers
paid dividends during the financial
year 2015-16. HDFC Standard Life
paid Rs 179.54crore (Rs 139.64 crore
in 2014-15), ICICI Prudential paid
Rs1202.99crore (Rs836.83 crore in
2014-15), Max Life paid Rs364.57crore
(Rs199.63crore in 2014-15)and SBI
Life paid Rs120 crore (Rs 120 crore in
Expansion of Offices
The decreasing trend of number of life
insurance offices (which had continued
until 2012- 13) had reverted from 2013-
14 and there is an increase in 2015-16 at
11071 from 11033 of the previous year.
It is observed that majority of offices of
life insurers are located in Semi-Urban
towns which are with a population
between 10,000 to 99,000. Around
49% of life insurance offices are located
in these small towns. This fact remains
similar for both private sector (38.4%
of the offices in semi-urban towns) and
public sector life insurer (61.5% of the
offices in semi-urban towns). After the
Semi-Urban towns, majority of the life
insurance offices i.e. 31.8% are located
in Urban towns with a population
between 1,00,000 to 9,99,999. This
applies to both private sector (35.2%
of offices in Urban towns) and public
sector life insurer (27.6% of offices in
District Level Presence of Life Offices:
As at 31st March, 2016, the sole public
sector life insurer, LIC of India had its
offices in 606 districts out of 640 districts
(As per the Decennial Census -2011) in
the country. As such, it covered 94.69
percent of all districts in the country,
whereas the private sector insurers had
offices in 554 districts covering 86.56
percent of all districts in the country.
In total, both LIC and private insurers
together covered 95.31 percent of all
districts in the country.
The number of districts with no presence
of life insurance offices stood at 30 in
the country. Out of these, 23 districts
belong to the six of the north eastern
states namely Arunachal Pradesh,
Nagaland and Sikkim. In 23 states/
union territories (out of a total of 36
states/union territories in the country),
all their districts were covered through
life insurance offices
Indian Insurance in the global scenario
Globally, the share of life insurance
business in total premium was 55.6%.
The share of life insurance business in
India was at 79% while that of non-life
insurance business was at 21 %.
In life insurance business, India is
ranked 10thamong the 88 countries, for
which the data was published by Swiss
Re. India’s share in global life insurance
market was 2.24% during 2015 where as
it was 2.08% in 2014.
However, during 2015, the life
insurance premium in India (inflation
adjusted) increased by 7.8% when global
life insurance premium increased by 4%.
Insurance penetration, density in
India and Global Trends
The measure of insurance penetration
and density reflects the level of
development of insurance sector in a
country. While insurance penetration is
measured as the percentage of insurance
premium to GDP, insurance density is
calculated as the ratio of premium to
population (per capita premium).
During the first decade of insurance
sector liberalisation, the sector has
reported consistent increase in insurance
penetration from 2.71 per cent in 2001
to 5.20 per cent in 2009. Since then,
the level of penetration was declining.
However, there was slight increase in
2015 reaching 3.44 percent compared
to 3.3 percent in 2014.
A similar trend in the level of insurance
density which reached the maximum
of USD 64.4 in the year 2010 from the
level of USD 11.5 in 2001. During the
year under review 2015, the insurance
density was USD 54.7.
The insurance density of life insurance
business had gone up from USD 9.1 in
2001 to the peak at USD 55.7 in 2010.
During 2015, the level of life insurance
density was USD 43.2. Similarly, the
life insurance penetration surged from
2.15 per cent in 2001 to 4.60 percent
in 2009. Since then, it has exhibited a
declining trend However, there was
a slight increase 2015 reaching 2.72
percent in 2015 when compared to
2.6% in 2014.
As per a report pre3pared by Swiss
Re, the real global direct life and nonlife
insurance premiums written grew
by 3.8% in 2015, up from 3.5% in
previous year. However in nominal
US dollar terms, premiums were down
by 4.2% due to wide-spread currency
depreciation against USD.
In real terms, the global life premium
growth slowed to 4% from a 4.3%
gain in 2014. In advanced markets
life premiums grew 2.5%, down from
3.8% growth the previous year. In the
emerging markets,overall life premium
growth doubled to near 12%.
In life moderate premium growth in
many markets and the prolonged low
interest rates dragged on profits. In
non-life both the underwriting and
investment results were weaker than
those of 2014.
The underwriting results were impacted
by lower reserve releases and investment
results were hit by low interest rates.
However, the insurance industry overall
remains well capitalised.
As per the report, the life premium
growth is expected to accelerate slightly
in the advanced economics in 2016. In
the emerging markets the life sector is
forecast to decelerate. The out-look
for the non-life industry in advanced
markets is more muted for non-life in
emerging markets is mixed.