Earlier this week, LIC made its annual investor presentation and announced its Q4 results. India's largest insurer posted a profit after tax (PAT) of Rs 57,419 cr, the highest since its listing. Its value of new business (VNB) grew 41.6% to Rs 14,179 cr and VNB margins rose to 21.2%, up 360 basis points from the previous year.
India's leading private insurers had a similarly good year. HDFC Life posted a VNB margin of 24.2%, ICICI Prudential 24.7%. SBI Life grew new business premium nearly 20% to Rs 425.5 billion. The industry's metrics have never looked stronger. The product mix underneath is a different story altogether.
Unit-linked insurance plans accounted for almost 59% of SBI Life's total APE (annualised premium equivalent) in FY25-26, and 48% of ICICI Prudential's. HDFC Life's ULIP share has been galloping over the years: from 16% in FY22-23 to 39% in FY25-26. LIC, which has historically been partial to participating products, grew its ULIP share of total APE by over 4x from 2% to over 9% in three years.
LIC's bigger shift is to non-participating savings, typically guaranteed income schemes, where the insurer keeps any surplus generated instead of sharing it with policyholders through bonuses. Non-par rose from 27.7% of individual APE in FY25 to 35.1% in FY26, driven largely by Jeevan Utsav, a high-ticket guaranteed-return plan. Non-par is a third of individual APE but contributed 53% of total VNB in FY26. Read this together with the growth in VNB margins (from 16.2% in FY23 to 21.2% in FY26) and you can guess where much of the margin improvement for LIC is coming from. On the earnings call earlier this week, CEO R. Duraiswami said: "Soon there will be a time where our margins and the margins for the market will converge, and that is clearly the direction in which we are seeing things pan out."
The convergence is already underway. LIC's VNB margin is 21.2%, HDFC Life's is 24.2. A gap that was over 12% four years ago is now just 3%. All private listed insurers sit between 23% and 28%, and LIC is catching up.
Protection, the category that includes term life insurance, the one product that truly insures risk and nothing else, is almost a footnote in every presentation. Its share depends entirely on how you choose to count it.
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At HDFC Life, protection is 29.1% of new business premium, but only 7.2% of individual APE. The bulk is credit life, which are single-premium policies bundled with loans. The difference: Credit life covers an asset and reduces over the loan tenure, while term covers a life and works as financial security and income replacement.
At ICICI Prudential, protection is at Rs 19 billion, almost 18% of total APE. Of that, Rs 11 billion (58.5%) is group term and credit life. Retail protection is just under Rs 8 billion, or 7.4% of total APE.
For SBI Life, protection was at 9.2% of total APE, while individual protection was just a shade over 4% (Rs 10.3 billion out of the Rs 242.7 billion).
At LIC, protection generated Rs 309 cr of individual APE in FY26, a mere 0.71% of Rs 43,335 cr total. By new business premium, the figure is half at 0.32%. LIC's protection share of individual APE has ranged from 0.6 to 0.7% over the last four years, while ULIP grew from Rs 1,158 cr to Rs 6,150 cr over the same period. A ratio 1:20 in favour of ULIPs.
So, what drives the product mix?
A standard online term plan for a thirty-year-old non-smoker costs Rs 8,000 to Rs 15,000 a year. An investment or savings policy from the same customer could carry a premium of Rs 50,000 to Rs 2,00,000. Agent commission is a percentage of the premium collected. The rate on term plans is typically higher than on investment or savings products. But the absolute payout isn't. A larger fraction of a small premium still pays the agent less than a smaller fraction of a large one.
Bancassurance, which generates more roughly half of private insurers' individual new business, compounds this. Banks are incentivised by the same commission arithmetic as agents. They also have a simpler product to sell: credit life, bundled with loans that also cover the bank's own exposure.
LIC sold 1.84 cr individual policies in FY26. Its 14 lakh agents now cover 59% of India's gram panchayats. It has appointed 3.45 lakh Bima Sakhees across 1.44 lakh panchayats to expand rural reach. Its bancassurance and alternate channels crossed Rs 5,000 cr in premium for the first time. On the earnings call, the management cited the government's vision of Insurance for All by 2047.
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Which is all very good. But its individual protection business, across all these channels, generated Rs 309 cr, a mere fraction (0.7%) of the total individual APE of Rs 43,335 cr.
(Ashok Hegde is founder of Gyansurance.com — which seeks to be India's first AI-powered insurance advisory and broking platform.)
Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.
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