Vehicle sales are looking up, housing loans have picked up, money continues to flow into bank deposits and Indians are travelling all over the world more frequently than ever before. That would suggest that general insurance firms are seeing good business, but it turns out that this isn’t true. State-run firms, in particular, are struggling.
While the industry recorded a total business as high as Rs 1.5 lakh crore in 2017-18, registering a year-on-year growth of 32 per cent — a decadal high — it is struggling to maintain the growth momentum so far this fiscal year.
Data released by the Insurance Regulatory and Development Authority of India (IRDAI) shows that gross direct premium underwritten by non-life insurers touched Rs 1.39 lakh crore in in the April-January period of FY19, a growth of just 12.65 per cent over the previous year. A bulk of this came from private general insurance companies which have earned premiums to the tune of Rs 67,570.14 crore during the period, clocking a year-on-year growth of 25.75 per cent, while state-owned general insurers saw a marginal decline in premiums collected at Rs 55, 974.63 crore from Rs 55, 978.59 crore during the same period last year.
Of the four state-owned general insurers, National Insurance and United India Insurance saw a decline in their premium growth during the period. National Insurance contracted by 12.96 per cent and United India Insurance declined 3.83 per cent. The other two state-owned general insurers — New India Assurance and Oriental Insurance — grew 5.41 per cent and 13.39 per cent respectively.
However, New India Assurance, the country’s largest general insurer by market share, also showed a negative growth in January, as its business fell by 14 per cent to Rs 1,708 crore from Rs 1,986 crore a year ago. This despite the fact that the company had shown a positive growth in the 10-month period growing by 5 per cent.
The slowdown in business was evident in the health, crops as well as motor segments, with private sector firms growing rapidly even as PSUs continued to be laggards. True, the government has launched a host of state-run insurance schemes as part of Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Suraksha Bima Yojana, Pradhan Mantri Fasal Bima Yojana and Ayushman Bharat.
But, many of these have been disappointing for insurers. For instance, the Ayushman Bharat scheme has seen many states opting for trustee or hybrid models, leaving very little room for insurers. Moreover, companies like New India Assurance are yet to bids from states. On the other hand, Pradhan Mantri Fasal Bima Yojana (PMFBY) has also not resulted in substantial growth owing to stiff competition, resulting in very low premiums realised.
The planned mega merger for three PSU general insurers is also likely to dent their financial performance till FY20 -- when the merger is likely to be completed.
But over the long run, prospects for the under-penetrated market remains sanguine as penetration, measured in terms of gross premium as a percentage of GDP wallows at just 0.7 per cent. The challenge, however, lies in designing new products suited to the needs of customer.