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 2014-15).

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


Paid-up capital

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,

insurance business.

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.

Benefits Paid

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

in 2014-15).

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

previous year.

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

in 2014-15.

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.

Investment income

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).

Retention Ratio

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

Urban towns).

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,

Manipur,Meghalaya, Mizoram,

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.