Insurance firms see drop in ULIP demand as stock market declines, ET BFSI

The life insurance {industry} skilled a slowdown in February 2025, with a pointy decline in unit-linked insurance coverage plan (ULIP) gross sales following latest inventory market corrections. The {industry}’s annualized premium equal (APE) fell 6% year-on-year (YoY), primarily as a consequence of a 23% drop in LIC’s APE. In distinction, non-public insurers posted a modest 5% YoY progress, highlighting uneven efficiency throughout the sector, in keeping with an analyst be aware by Elara Capital.

The decline in ULIP gross sales comes amid heightened market uncertainty, as demand for these merchandise is carefully tied to fairness market efficiency. Traditionally, ULIP demand lags market actions by two to 3 quarters, indicating that weak spot on this section may persist within the close to time period. Insurers with a excessive ULIP product combine, corresponding to SBI Life and ICICI Prudential (IPRU), are anticipated to face vital progress constraints.
HDFC Life, with its extra balanced product portfolio and decrease dependence on ULIPs, has managed to cushion the influence of the slowdown.

Whereas insurers reliant on ULIP merchandise could face headwinds within the coming quarters, these with a balanced product combine are prone to achieve market share because the {industry} adapts to shifting market dynamics.

LIC struggles

The industry-wide strain was additionally evident in retail weighted obtained premium (RWRP) figures, which fell 4% YoY in February. LIC’s RWRP declined 17% YoY, dragging down general progress. In the meantime, non-public gamers posted a average 2% enhance, though efficiency diversified throughout completely different segments. Smaller insurers outperformed, with RWRP rising 7% YoY, largely pushed by robust group enterprise whereas mid-sized insurers noticed a 6% YoY rise in RWRP. Massive non-public insurers struggled, reporting a 3% decline.

LIC’s efficiency was additional hampered by distributor resistance to its revised fee construction following regulatory modifications in give up worth norms. Analysts consider this difficulty could proceed to influence the corporate’s progress within the close to time period.

Sector faces excessive base impact

The {industry}’s present struggles come after a interval of robust progress in February 2024, when the sector expanded 25% YoY, with LIC and personal insurers rising 27% and 25%, respectively. This excessive base impact, mixed with the slowdown in ULIP gross sales, has resulted in a pointy moderation in progress.

Amongst non-public insurers, Axis Max Life and HDFC Life emerged as relative out-performers, whereas SBI Life and IPRU confronted setbacks. The decline in ULIP gross sales, pushed by market volatility, was a key issue behind the underperformance of insurers with a excessive publicity to those merchandise.

Past market-driven pressures, considerations over regulatory actions within the bancassurance channel are including to the sector’s challenges. Analysts warning that valuations of life insurance coverage corporations could stay subdued within the close to time period as a consequence of uncertainty surrounding regulatory oversight and distributor dynamics.

Given the evolving market situations, analysts counsel a choice for insurers with well-diversified product portfolios and multi-channel distribution networks. HDFC Life, specifically, stands out for its potential to navigate regulatory modifications, keep steady margins, and restrict publicity to risky ULIP gross sales.