taxThe life insurance industry faced a notable decline in new business premium income tax in November 2023, with figures showing a 25.28% dip compared to the same period in 2022.
The total new business premium income stood at Rs 26,494.83 crore, down from Rs 34,588.8 crore recorded the previous year. Several factors contributed to this decline, including a significant reduction in group premiums and changes in taxation guidelines for policies with higher ticket sizes.
These factors impacted both the state-run Life Insurance Corporation of India (LIC) and private insurers. Data from the Life Insurance Council revealed that premiums for private insurers saw a year-on-year decrease of 9.33%, amounting to Rs 10,360.29 crore compared to Rs 11,426.73 crore.
This decline was attributed to changes in product mix aimed at mitigating the impact of taxes on premiums exceeding Rs 5 lakh. Similarly, LIC’s premiums experienced a more substantial decline of 32.86%, totaling Rs 16,134.55 crore compared to Rs 24,032.07 crore in the same period last year.
This decline was primarily driven by a decrease in group premiums, which fell by 37.48% to Rs 11,649.54 crore from Rs 18,635.93 crore. The overall group premium for the industry witnessed a significant drop of 34.02% to Rs 14,735.49 crore from Rs 22,334.95 crore year-on-year.
Given LIC’s dominant position in the group tax segment, any decline in its business inevitably impacts the industry’s overall figures. Experts attribute much of this decline to changes in taxation norms, which necessitated adjustments in product offerings.
Private insurers, in particular, had to adapt their product mix to align with these changes, leading to the observed decrease in premiums. In the individual single premium segment, insurance companies collectively experienced a decline of 14.81%, with premiums dropping to Rs 3,322.48 crore from Rs 3,900.04 crore.
Private insurers saw an even sharper decline of 18.93%, with premiums totaling Rs 1,395.1 crore compared to Rs 1,720.81 crore in the previous year. The shift in premium figures underscores the challenges faced by the life insurance industry amid evolving regulatory and market conditions.
While changes in taxation norms have necessitated strategic adjustments, insurers will need to continue innovating and adapting to sustain growth in the dynamic landscape of the insurance sector.
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