General Insurance: In the pink of health despite weak motor insurance

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Emkay Global Financial Services has released a report basis the data by the General Insurance Council (GI Council) for the Indian general insurance (GI) industry for the month of September 2021 and YTD FY22. The Health segment continued to deliver strong growth (29% YoY for YTD FY22; 17% YoY in Sep’21) on a relatively stronger base, offsetting sluggish growth in the Motor segment (~4% YoY for YTD FY22; 1% YoY in Sep’21).

Overall Gross Direct Premium Income (GDPI) grew 12% YoY for YTD FY22 but declined by 2.8% YoY in Sep’21. Overall GDPI for the industry stood at Rs 1,08,700 cr for YTD FY22 vs. Rs 96,800 cr in the previous year.

Overall GDPI growth driven by Health and Personal Accident: For YTD FY22, the Indian GI industry posted impressive ~12.3% YoY GDPI growth, aided by ~28.8% growth in the Health segment and a strong growth of 84.7% in a relatively smaller segment, Personal Accident. The Motor segment remained a drag on overall GDPI growth, registering a sluggish 4.4% YoY growth for YTD FY22, despite having a favorable low base advantage. This diverging growth in Motor and Health segments led to strong 37.6% YoY growth for Standalone Health Insurers (SAHIs), while muted 12.3% growth for private multiline insurers and 8.1% growth for the PSU multiline insurers in overall GDPI for YTD FY22.

Segment-wise dynamics give advantage to SAHIs: Strong growth in the Health segment and muted growth in Motor mean that health-focused SAHIs are delivering strong growth and increasing their market share, whereas multiline insurers (private and PSU) continue to face challenges. However, different multiline insurers have adopted different growth strategies, with a focus on either market share growth or profitability, thereby avoiding engaging in non-profitable government and corporate businesses.

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Covid-19 impact drives health segment pricing; retail health growth falters in Sep’21: Although Covid-19, especially the second wave, was very damaging to the health insurance segment in terms of a big spike in claims, it accelerated growth for the segment. In India, structural growth has been the key driver for the health insurance business for a long time, with an exceptionally high share of out-of-pocket expenditure, poor state of government health facilities and rising affluence among the masses. The Covid-19 pandemic accelerated the topline growth in health insurance, driven by a combination of factors and it is now seen as a significant financial tool. An increase in the number of people (retail and group) opting for health insurance, demand for better coverage among existing policyholders, demand for short-term Covid-19 health cover and increased claims costs driving price hikes have resulted in very strong growth in premiums. For YTD FY22, the group health segment saw 36.7% YoY growth, whereas retail health saw 17.9% YoY growth. For the month of Sep’21, retail health premiums grew at a meagre 2% YoY, led by negative growth by PSUs.

The slowdown in Motor Vehicle sales reflects in slowing motor segment premium; pricing competition intensifies: Despite the benchmark ruling of mandating multiyear (3 year for cars and 5 years for two-wheelers) motor third party (TP) insurance for new vehicles, the motor insurance segment has been facing a prolonged slowdown due to a host of underlying factors apart from low demand and sale seen in this segment. Going forward, the segment may see recovery, helped by increased mobility as post-pandemic economic recovery gains momentum. The share of motor insurance in overall GDPI declined to 27% in YTD FY22 from 39% in FY18. The slowdown in new vehicle sales continuing from pre-Covid-19 times, no tariff hike in motor TP business approved by the regulator for FY21 or FY22 and intensified competition in OD pricing (especially by the new entrants and struggling PSUs) led to a muted show in the motor segment despite a favorable low base of FY21. For YTD FY22, motor TP grew 2.3% YoY, whereas motor OD saw 7.8% YoY growth.

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Crop insurance witnessed a decline; accidental spurt continues in growth in Personal Accident segment: The crop insurance segment saw a 29% YoY decline in Sep’21, leading to YTD FY22 crop premium declining 5% YoY to Rs 17,500 cr. This could be an outcome of some lower Kharif sowing, owing to uneven temporal and geographic distribution of monsoon and some states increasingly being less enthusiastic about the scheme implementation. Most private multiline insurers have kept their crop insurance exposure either flat or reduced it. PSU multiline insurers have completely withdrawn from crop insurance this year and the entire share in the crop segment has gone to the specialized PSU, Agriculture Insurance Company of India (AIC)