Growth momentum is sustainable as it is driven by higher health contract sales and easier-to-execute online purchases, experts say
Non-life insurance players are worried about their profitability despite sustained growth in their activity over this financial year.
The non-life insurance industry or general insurers saw growth of 19.5% in July with gross direct premiums written at Rs 20,171 crore for the month, compared to Rs 16,884 crore in July 2020. Between April and July, the gross direct premiums written by the industry was Rs 64,607 crore showing a growth of 15.5 percent.
The growth momentum is sustainable, according to insurance industry officials, as it is driven by higher sales of health insurance policies and easier-to-execute online purchases.
Bhargav Dasgupta, MD and CEO of ICICI Lombard, pointed to a changing trend when calling the company’s results to analysts. “Medicare continued to show robust growth for the sector, driven by heightened awareness due to the pandemic and then by a shift in consumer attitudes towards purchasing protection,” said Dasgupta.
But the growth in activity is not reflected in the bottom line, with several companies reporting declining profits in the first quarter of 2021-2022.
Profitability could also suffer because of the high claims on health policies due to the Covid and the lack of revision of the prices of third-party automobiles. The additional risk of externalities such as catastrophic events is a concern.
According to industry data, Covid claims reported in the April to June quarter exceeded 1 million compared to 0.98 million cases in the entire previous fiscal year.
“The first quarter of fiscal 22 was negatively impacted due to the increase in claims due to the second wave of the pandemic. Given the openness of the economy and the expected growth of it, the performance of the industry is expected to improve over time, ”Care Ratings said in a report.
“However, given that no increase in the motor liability premium has been announced and Covid claims persist (the net incurred claims ratio jumped more than 1.5 times in the first quarter of the fiscal year 22 compared to the first quarter of fiscal year 21), the sector is expected to come under pressure in the short term. Profitability, ”the report said.
“The impact of the pandemic eased in the second quarter. However, the threat of the third wave continues to weigh heavily. Adjusted for Covid-19 related claims, the company performed well in all operating parameters, ”said Atul Sahai, President and CEO of New India Assurance.
On the way to the IPO
Three insurance companies are entering the primary market with initial public offerings in the coming months to mop up more than Rs 10,000 crore.
These companies are – PB Fintech, which operates the Policybazaar insurance brokerage; independent health insurer Star Health & Allied Insurance Company; and third-party administrator Medi Assist Healthcare Service.
They have already submitted their draft prospectus to the market regulator Sebi. More than 40 companies have reached the IPO market so far this year, raising nearly Rs 70,000 crore.