PM Modi’s crucial step of demonetization has proven to be a revolutionary one. It influenced every aspect of Indian Economy and one among them is Savings and Investment, be it physical or financial. After demonetization, there is a noticeable decline in the household savings in physical assets, leading to an increase in savings in financial assets like insurance, equity, and mutual fund investments.
“We expect current momentum in life insurance/capital market inflows to continue in FY2018 as investors continue to shift to financial savings from physical savings,” Kotak said.
The main government agencies serving in the insurance sector are Life Insurance Corporation of India (LIC), Oriental Insurance Co. Ltd and New India Assurance Co. Ltd etc. and those in the private sector are ICICI Prudential Life Insurance, HDFC Life, Max Life Insurance, Kotak Life Insurance, Bajaj Allianz General Insurance. These insurers took various steps for their customers such as cutting the deposit rates, extending the grace period to pay the premiums.
For all of these reasons, the fiscal year 2017 has been the lucky and the best one since the last 9 years for the insurance companies who have seen their collection of premiums go up. The insurance companies showed a growth of 21 percent in the APE (Annual Premium Equivalent) this year. The state-owned LIC had grown by 16 percent while the other private insurers have seen a 26 percent growth in their APEs.
“Demonetization has clearly been a positive trigger (33% y-y growth over the past five months for private insurers), and listed insurance companies, in our view, remain good plays on increasing financial savings rates over the longer term,” Nomura analysts Adarsh Parasrampuria and Amit Nanavati said.
Demonetization showed its impact in the beginning itself by significantly raising the premium deposits. According to the monthly business statistics for life insurance companies released by the Insurance Regulatory and Development Authority of India (IRDA), individual single-premiums collected in November, for all the life insurers, was Rs6,692 crore which is 507% more than the Rs1,103 crore collected in November 2015. Even on a month-on-month basis, the segment grew 170% from Rs2,481 crore in October.