Global economic concerns and the fall in equity markets has taken a toll on life insurance sales with new premium income expected to drop by at least 2 per cent in 2008-09, industry players said. Companies are, however, seeing a growth in overall premium income as policyholders are paying their premium to keep policies active before the current financial year concludes.

Between April and January 2008-09, premium from the sale of new policies rose 3.5 per cent to Rs 65,337.48 crore (Rs 653.37 billion), as against Rs 63,127.92 crore (Rs 631.28 billion) during the same period last year, according to latest data released by the Insurance Regulatory Development Authority.

The country's largest insurer, Life Insurance Corporation of India, has seen its new premium income drop by 1.89 per cent to Rs 39,858.26 crore (Rs 398.58 billion) during the period, while India's largest private sector player ICICI [Get Quote] Prudential has seen an 8.44 per cent drop its premium income to Rs 5,303.49 crore (Rs 530.3 billion). While sales in March, which account for 25-30 per cent of the business, would determine the final outcome, indications are that big-ticket policies are not being sold even as the number of policies sold is rising.

"The new premium income is expected to dip by 2-5 per cent as compared to last year since people are witnessing shrinkage in income," said Life Insurance Council Secretary General S B Mathur.

In 2007-08, new premium income had stood at Rs 90,000 crore (Rs 900 billion). The former LIC [Get Quote] chairman added that, overall, the industry would grow by 15-20 per cent with total premium income collection, including renewals, rising to around Rs 2,40,000 crore (Rs 2,400 billion), as against Rs 2,00,000 crore (Rs 2,000 billion) in 2007-08.

"The economic slowdown has taken its toll on the life insurance industry, and (new) premium income will drop. Though the renewal premium will grow substantially by 35 per cent," added ICICI Prudential MD & CEO Shikha Sharma.

"The worsening economic environment has led to a reduced ticket size as the number of policies is growing. Over the last few months, we have seen an increase in demand of guaranteed products and only product innovation can now attract people who are wary of investing in unit-linked plans at this time," said IDBI Fortis MD G V Nageswara Rao.

"Any life insurer makes business from premium renewal. Persistency and emphasis on renewal income will help the industry to grow. However, it is too early to predict growth. The drop in new premium income is not because of a combination of factors such as slowdown, (but) people holding onto their investment," said Aviva [Get Quote] Life MD and CEO T R Ramachandran.