The Indian life insurance industry is expected to log a growth of 15-18% in the current fiscal year ending March 2018 (FY2018) in terms of annual premium equivalent (APE), said a senior official at credit rating agency ICRA.
Mr Karthik Srinivasan, Senior Vice-President, ICRA, said that, on APE basis, the industry’s new business growth stood at 19% in FY2017, reported the Indo-Asian News Service.
Queried about the negative APE growth rate, Mr Srinivasan said: “The 19% APE growth last fiscal was sort of an aberration. In FY2016, the APE growth was only 11%. Hence on thea conservative side, I have put the APE growth between 15-18%.”
ICRA analysed the performance of 11 life insurers (comprising state-owned LIC and 10 companies from the private sector) collectively representing around 95% of new business premiums in the sector in FY2017.
He said despite the adoption of technology in areas like policy issuance and servicing, the cost structure of life insurers has increased.
“This increase in expenses is partly on account of higher administration and employee related expenses, as the industry looks to scale up,” Mr Srinivasan said.
He said solvency levels of the life insurance companies look adequate with the median solvency levels of the 10 private layers analysed at 2.3 times as at 31 December 2016 as against a regulatory minimum of 1.5 times.
Srinivasan said the solvency levels would decline over a period of time as life insurers scale up the mix of traditional products.
He said the companies can grow their business without raising external equity capital over the near to medium term.