Muted growth for Indian general insurers: Care Ratings

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SME Times News Bureau | 22 May, 2020
Indian general insurance industry is expected to witness muted growth during the first quarter of the current fiscal due to Covid-19 lockdown, credit rating agency Care Ratings said on Friday.

In a report, Care Ratings said: "The insurance business is expected to witness muted growth in the first quarter of FY21 due to the extended lock down, however the pandemic could cause an increased interest in the health segment."

"Further, due to the lockdown the claims may be lower, thereby having lower impact on the combined ratio of the non-life companies," it added.

Simply put, combined ratio is claims + expenses divided by premium income.

The credit rating agency said that the gross direct premium for April 2020 fell by 10.6 per cent to Rs 14,209 crore for the industry from Rs 15,892 crore earned in April 2019.

"This can be juxtaposed to an increase of 14.5 per cent yoy (year-on-year) in April 2019," the report said.

Barring fire, health and liability insurance portfolios, all other segments showed a decline in premium income.

The fire segment grew by about 41 per cent, mainly due to increase in reinsurance rates by GIC Re in March 2019 and January 2020.

"This was however lower than the 51.5 per cent growth demonstrated in April 2019. These policies are subscribed by businesses and generally run on a financial year basis and are renewed in every April," Care Ratings said.

The industry had booked a premium of Rs 4,028 crore under fire insurance portfolio last month.

Logging a premium of Rs 5,380 crore last month, the general insurers grew their health segment by 6.2 per cent, however, since it is the largest segment in April 2020, its growth along with the fire segment prevented the entire non-life insurance premium from being a washout.

"However, its growth in April 2020 may also have been affected by IRDAI (Insurance Regulatory and Development Authority of India) permitting the payment of renewal premium due in the March 25, 2020 to May 03, 2020 period by May 15, 2020 and allowing the payment of health insurance premium in instalments."

According to Care Ratings, the motor insurance segment has witnessed a significant decline as not many vehicles were sold in April 2020, and the amount is generally from the renewal of premium from existing cars.

With mandatory three-year (cars) and five year (two wheelers) period insurance for new vehicles, the contribution from sale of new vehicles is high.

Further, not increasing the premium rates for motor third party liability insurance cover may also have been a contributing in the fall of such insurance premiums.

In April this year, the non-life insurers had booked a total premium of Rs 2,622 crore under motor insurance down from Rs 5,141 crore earned in April 2019.