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Insurers beat slowdown, post healthy premium growth in first half

George Mathew
Despite the slowdown, particularly in auto sales that contribute the largest amount of premiums for the Indian general insurance sector, the industry has maintained a healthy growth rate of 16 per cent in the first half (H1) of the current financial year.

The economy may be slowing down but the insurance segment, both life and non-life, has recorded a substantial growth rate in premiums, at least till the six-month period ended September 30 of 2019-20. However, insurers are keeping their fingers crossed about the prospects for the sector in the next six months.

Despite the slowdown, particularly in auto sales that contribute the largest amount of premiums for the Indian general insurance sector, the industry has maintained a healthy growth rate of 16 per cent in the first half (H1) of the current financial year.

According to the Life Insurance Council, life insurance premium of all 24 players rose 35.11 per cent during the April-September period of the current fiscal to Rs 125,758 crore. The new premium collected by LIC in the first six months of 2019-20 jumped 42 per cent to Rs 89,980 crore. For the rest of the private sector players, the cumulative premium till September 2019 rose 21 per cent to Rs 35,778 crore.

“If the economic slowdown continues, insurance will be impacted. Individual APE (annual premium equivalent) has already declined in September for the life segment,” said an official of an insurance firm.

Explained

Good news, but worries still remain for industry

If the slowdown continues, insurance will be impacted. Individual APE (annual premium equivalent) has already declined in September for the life segment. Individual APE declined 3 per cent year-on-year in September, compared to 11-27 per cent growth in April-August 2019. Overall APE was up 3 per cent YoY on the back of stronger group business.

Available initial figures show that the gross premiums of 34 general insurance companies, including four public sector general insurers, have grown by 16 per cent to Rs 77,453 crore in the first half of 2019-20 from Rs 66,573 crore in the same period of 2018-19. However, slowdown seems to be catching up with the life segment. “Individual APE declined 3 per cent year-on-year (YoY) in September, compared to 11-27 per cent growth in April-August 2019. Overall APE was up 3 per cent YoY on the back of stronger group business,” said a Kotak Securities report. ICICI Prudential Life’s APE declined for the third month, albeit at a lower pace. Even the high-growing HDFC Life declined after five months of consistent high growth. SBI Life and Max Life continued to moderate for the second consecutive month, it said.

For September, the general insurance industry has grown by almost 40 per cent at Rs 19,047 core. The public sector insurers have mopped up a premium of Rs 8,873 crore, up 43 per cent while the private sector companies have mobilised a premium of Rs 10,174 crore, up 37 per cent during September.

“In general insurance, in my view, the spurt is primarily because of two reasons: the increase in motor third party insurance rate and the hefty spot penalties by traffic police as per the new Motor Vehicles Act for failure to possess vehicle insurance. In life insurance, one of the reasons could be retail pension (or savings) products with guaranteed returns which are more attractive than bank deposits,” said former Irdai member KK Srinivasan.

Public sector general insurers, led by New India Assurance, have made a remarkable turnaround by recording growth of 12 per cent during H12019-20. Despite lacking basic solvency, even the merging companies like National Insurance Company, United India Insurance and Oriental Insurance Company have done well and recorded good growth in the reporting period. “We have got a very clear plan in place to grow our business. Due to certain practices of certain players, it is now difficult to compete in motor insurance business. That’s why, we are concentrating in other segments like marine, hull, aviation, property and engineering which constitute now more than 50 per cent of our portfolios,’’ said Atul Sahai, CMD, NIA.

The NIA’s motor insurance business has remained flat, he said, adding: “In health portfolio, we will soon bring down claim experience to double-digit figures by the fiscal-end.”

The private general insurance industry, led by Bajaj Allianz General Insurance Company , has mobilised a premium of Rs 41,048 crore, up 20 per cent, in H12019-20.