India's life insurance APE growth slows to 10.5% in August

LIC's performance in 5M FY 2025 outpaced its private sector peers

India’s life insurance industry reported slower annual premium equivalent (APE) growth in August, with a year-on-year (YoY) increase of 10.5%, down from 16.3% in July 2024.

The slower growth comes after earlier demand had been concentrated in March 2023, leaving a lower base for comparison in subsequent months. Individual non-single policies remained flat in August 2024.

Life Insurance Corporation of India (LIC) recorded 12.8% APE growth in August, largely driven by group premiums, in contrast to an 11.0% decline in August last year. 

For the period between August 2022 and August 2024, the compound annual growth rate (CAGR) for the industry was 6.4%, with private insurers showing a stronger 11.0% growth, whilst LIC saw a marginal increase of 0.2%.

The growth in premiums during the first five months of fiscal year 2025 (FY 2025) was largely due to factors such as increased insurance coverage, larger ticket sizes, and a rise in single premiums.

LIC's performance in August and the first five months of FY 2025 outpaced its private sector peers, primarily due to group single premiums and a low base effect from the prior year. 

In August 2023, LIC's performance was affected by reduced single premiums, momentum from March 2023, and the introduction of a more attractive tax regime for individual taxpayers.

Saurabh Bhalerao, associate director at CareEdge, commented on the moderation in growth, noting, “The private sector has a larger share in the non-single sub-segment (mainly individual premiums), whilst LIC continues to dominate the single premium sub-segment, especially the group business. Meanwhile, the number of non-single individual policies remained flat as the rise in the private policies was offset by a decline in LIC’s numbers,”

Gaurav Dixit, director at CareEdge Ratings, provided an optimistic outlook for the life insurance sector, stating that new business premiums are expected to grow on a lower base in FY25, with total premium growth likely to remain robust. 

“The growth drivers include prudent underwriting, GDP growth, rapid urbanisation, demand for ULIPs (based on market performance) and protection plans, younger demographic driving insurance coverage, and rising awareness of retirement planning, and digital infrastructure amplifying multiple distribution channels,” Dixit said.

Dixit further noted that new regulations on surrender values, set to be implemented by the Insurance Regulatory and Development Authority of India (IRDAI) from 1 October, could lead to changes in product and commission structures, potentially causing premium volatility in the second half of the fiscal year. 

However, as these changes are expected to benefit customers, medium-term growth prospects remain strong, with CareEdge forecasting a sustained growth rate of 11% to 13% over the next three to five years. 

“There is likely to be increased emphasis on the agency channel, driven by banks' focus on deposit gathering and companies' efforts to reduce reliance on bancassurance. Meanwhile, any potential adverse macroeconomic conditions could impact growth. Despite these challenges, the medium-term outlook remains positive overall,” added Dixit.