The life insurance industry posted a negative year-on-year growth of 5 percent in May with most private players reporting a significant dip in fresh business premium.

Riding on the demand for traditional policies, Life Insurance Corporation of India, reported an 11 percent growth in first year premiums.

As per the figures compiled by the insurance regulator, LIC collected Rs 3,242 crore by way of first year premium in May against Rs 2,923 crore in the corresponding month last year.

Private life insurer ICICI Prudential Life Insurance registered a 43 percent de-growth, garnering Rs 348 crore in fresh business premium. In May 2008, ICICI Pru Life collected Rs 697 crore.

Some private life insurance players that witnessed a negative growth include Bajaj Allianz Life Insurance (-40 percent), SBI Life Insurance (-13.6 percent), Max New York Life Insurance (-31 percent), Reliance Life Insurance (-24 percent), HDFC Standard Life Insurance (-19 percent) and Aviva Life Insurance (-29 percent).

Thomas Mathew, Managing Director, LIC, said, “We have made a good beginning. However, the first two months of the financial year are not a very good indicator of the year ahead. The real business starts from June-July only. We are aiming for a 30-40 percent growth in first premium collection in the current year”.

Last year, LIC reported negative growth in its fresh business premium as the markets were down and the ULIPs had taken a beating. In the last couple of years, most of the sales for life insurance companies came from ULIPs for all companies. However, with the recent rally in the stock markets, the players hope that the demand for ULIPs will revive.

The stock market is picking up and ULIP sales will also pick up, said Mathew.

While older private life insurers plan to leverage the existing network of branches and agents (and not expand), the newer players are looking to increase their presence by opening new branches, strengthening their distribution networks and expanding their agency force.

New companies like Bharti Axa, Future Generali and IDBI Fortis have registered a positive growth in their first year premium collections.