India’s Auto Slowdown Is Changing Insurance Companies’ Product Mix
Insurance regulator suggests modification in steps for speedy settlement of insurance claims in India. (Photographer: Akio Kon/Bloomberg)

India’s Auto Slowdown Is Changing Insurance Companies’ Product Mix

India’s worst auto slowdown in over two decades has prompted general insurance companies to look at ways to reduce dominance of motor business in their product mix.

While the motor business remains the biggest contributor to premium, insurers are focusing on ramping up the non-motor business including health, fire and other segments.

Motor business posted a muted gross direct premium growth—the lowest across categories—during the first eight months of the ongoing fiscal as Indians bought fewer vehicles. In comparison, the gross direct premium income underwritten by insurers through non-motor business continued to register double-digit growth until November.

For New India Assurance Co. Ltd., India’s largest general insurer, the motor segment contracted in the first half of the ongoing fiscal even as net earned premium from the non-motor segment grew.

For ICICI Lombard General Insurance Co. Ltd., the largest private insurer, net earned premium from the non-motor segment grew at a higher rate in the six months through September 2019 compared with the motor segment.

Non-motor growth outpaced the motor segment for other peers as well.

  • For SBI General Insurance, motor segment’s net earned premium contracted 11 percent year-on-year as on first quarter of FY20 whereas the non-motor segment grew 197 percent during the same period, aided by health insurance business which grew 50 percent.
  • Future Generali India Insurance Company Ltd.’s non-motor segment grew 87 percent in the first half of FY20, driven by 32 percent growth from the health medium. The motor segment grew 10 percent.
  • HDFC ERGO General Insurance Company Ltd., in its annual report for FY19, said the health segment has been one of its key drivers, growing at an annualised rate of 24.5 percent since 2001.

Focus On Non-Motor Business

Sanjay Datta, chief-underwriting, claims, reinsurance and actuary, at ICICI Lombard, told BloombergQuint over the phone that the objective is to narrow the gap between motor and non-motor segments. He expects health, property and casualty segments to drive growth in the future.

Pushan Mahapatra, managing director and chief executive officer at SBI General Insurance, expects growth in various health and personal accident products, with the fire and liability lines of business being the focus in the corporate segment. Mahapatra also expects tremendous potential in the home insurance space where both uninsured and underinsured concerns exist.

Anup Rau, managing director and chief executive officer at Future Generali, said it’s taken initiatives for robust growth in retail health, which has witnessed growth of over 50 percent in premium.

Not surprising then that while the motor segment still dominates, according to data shared by General Insurance Council, the gap with the rest of the categories is narrowing.

Among private general insurers, health insurance business comprised 26 percent of ICICI Lombard’s portfolio in the first half of this fiscal, up from 20 percent in FY19. The share of the motor segment rose from 45 percent to 46 percent.

In FY19, SBI General Insurance’s motor segment to non-motor segment ratio increased to 63:37 from 93:7 in the previous financial year.

Upbeat On Health

Growth in health business will be higher than that of motor business, Datta said, aided by increasing distribution footprint and improving quality in terms of greater coverage and depth.

Mahapatra expects SBI General Insurance’s health portfolio to grow at about 39 percent this fiscal. “With the final quarter of the fiscal around the corner, the segment will only improve with more customers looking for health insurance policies for tax benefits offered,” he said.

With the launch of Ayushman Bharat, awareness and penetration of health insurance has improved. Mahapatra expects growth in the health segment to be driven by targeted products such as critical illness, hospital daily cash along with enhanced health covers. The standalone health insurers grew 30-35 percent year-on-year, indicating the opportunity available in the segment, Mahapatra said.

Future Generali’s Rau said overall health insurance will grow at an annualised rate of 16-17 percent in the next three-five years. “We expected to grow our health business at over 50 percent compounded during the period,” he said. “The growth will essentially be led by targeting millennials with new innovative products in tier II and tier III cities, while increasing the share in the existing markets.”

What Next For Motor Insurance

The insurance regulator has made multi-year third-party cover mandatory to increase penetration. It also increased the penalty for driving uninsured vehicles. But these efforts will help only if auto sales recover.

SBI General Insurance’s Mahapatra expects tepid growth in the motor segment for another two to three quarters before the cycle turns. And the revival will be aided by new traffic rules, according to ICICI Lombard’s Datta.

Rau sees signs of the auto slowdown already bottoming out. The government’s focus towards demand growth and increase in disposable income as well as planned infrastructure spending should pull up the demand in a couple of years, he said in an emailed response. “Fundamentally, India still ranks low in terms of car penetration.”

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