GST rate cut uncertainty dents life insurers’ new business 22% in Dec.

New business of life insurers declined almost 22% year on year in December to ₹30,218.71 crore, likely due to the continuing suspense over the indirect tax levies on insurance policies with the GST Council deferring a call on an expected tax cut at its December 21 meeting, along with tight liquidity conditions and a general slowdown in the economy.

December’s drop in new business marks a deepening contraction from November, when such business fell for the first time in 2024-25, albeit by a relatively moderate 4.5% to ₹25,306.56 crore In December 2023, insurers had reported ₹38,583.13 crore as first year premium receipts.

One of the contributing factors linked to the downward trend over the past two months, is the new surrender value norm that came into effect from October. For the nine months ended December 2024, new business has increased almost 10% to ₹2,75,086.92 crore, data released by the Life Insurance Council showed.

In December, private players fared better than the State-owned market leader Life Insurance Corporation of India (LIC), clocking a 7% increase in new business to ₹16,694.85 crore. For the nine-month period, the first-year premium of the private life insurers rose nearly 14% to ₹1,17,130.96 crore.

For LIC, new business was down more than 41% to ₹13,523.87 crore in December 2024 from ₹22,981.28 crore a year earlier. However, the behemoth’s nine-month tally was 7.16% higher than the previous year at ₹1,57,955.95 crore.

The growth moderation for life insurers had been anticipated by some analysts. Emkay Research recently said for listed private life insurers a host of player-specific issues including discontinuation of some products after the new surrender regulation, slowdown in the bancassurance channel and increased competition in some key channels were likely to impacting factors.

Emkay Research said the December growth trends were impacted by regulatory uncertainties regarding the banca channel and implementation of the new surrender regulations leading to an impact on the lower ticket-size policies. “Given the large opportunity in the life insurance sector owing to low penetration, we remain optimistic on growth in the medium term and expect private sector retail APE (annualised premium equivalent) to grow 17-18% and LIC to report 4-5% growth. This [in turn] would thus drive 13-14% retail APE growth for the industry,” it said.