The coming in of a new Managing Director in Hdfc Standard Life Insurance has had its impact perhaps…or it is just the old favorite Hdfc Bank pushing its sales force and getting some rocking numbers for Feb and March? Clearly Hdfc standard life and SBI life have improved their market share even in a sluggish market. The impact of this growth is a good omen for Hdfc which will have to pay for less losses. However the way the life insurance industry accounts for new business – it might increase the losses as business increases.

Growth sluggish: In February 2010, industry WNRP grew 4% MoM helped by a strong 8% MoM growth for LIC. For
private players WNRP remained flat MoM. In January 2010, WNRP declined ~25% (~30% for private players) MoM.

LIC reported WNRP growth of 41% and private players reported WNRP growth of 16% YoY. HDFC Standard Life growth is strong at 48% YoY and other large private players grew 7-25%. Birla Sunlife Insurance, Max Life and Om Kotak Life Insurance WNRP declined 7-25%. ICICI Prudential Life Insurance grew just 7% YoY.

YTD basis, for the industry, WNRP grew ~13% due to a strong ~25% growth in LIC. YTD private players grew just 4%. Among the large private players SBI Life is the only large player to report strong 35%+ YoY growth, whereas, for others it has been +10% to -20%.

LIC, HDFC Standard Life, Reliance Life gain market share: LIC’s market share improved to 48.9% from 47.3% in January 2010. Among private players (PP) HDFC Standard Life Insurance and Reliance Life gained market share of 100bp and 330bp respectively MoM. On a YTD basis, LIC’s market share improved to ~47.3% v/s 44% in FY09.

ICICI Prudential Life Insurance and Bajaj Allianz Life Insurance market share declined to 17.7% v/s 19.3% a year earlier, and to 11.1% v/s 13.9% a year earlier, respectively. SBI Life’s market share improved sharply to 14.4% v/s 11.3% a year earlier.

Wnrp: weighted new recd premium

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Who can become a builder, who can become a broker, how much brokerage to charge, should prices be quoted for built up, super built up….NOTHING is even documented forget being regulated. You could go and look for a flat for Rs. 1.3 crores. On finalizing the flat you realize that the ‘other charges’ – loading, brokerage, stamp duty, parking charges, etc. etc. add upto Rs. 15 lakhs – about 12% of the so called ‘price’ of the house.

At least some of these costs are available upfront, while some of the costs is just a guess – like loading. Sometimes the neigbhouring building also seems to be in the loading – at least in big Indian villages like Mumbai.

The other real cost is the interest cost – let us say you borrowed the full Rs. 1.3 crores + the stamp duty + the life insurance charges – after all you want your wife to inherit only the home, not the home loan as the SBI life advertisement tells you! If you repay this as an EMI – for 20 years, the true cost of your house is Rs. 2.6 crores (without considering the regular maintenance and tear and wear that would have happened).

However if a person sells this house after 27 years, he will tell his friends “I bought this house for Rs. 1.3 crores (remembering the brokers words) and now I have sold this house for Rs. 4 crores – it is a 3 bagger in 27 years. I wish I had bought one more flat”. Mathematically I leave it to you to calculate the profits, and find out the IRR.

Amar Pandit has written a nice article in rediff.com about the list of ‘charges’ while doing a real estate deal. It is worth reading while finalising your house purchase.

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