SBI General Insurance has clocked the premium growth 1.7 times the non-life insurance industry in the first nine months of the current fiscal. Managing Director and CEO Naveen Chandra Jha discusses with Narayanan V about the segments contributing to the growth, industry’s high distribution costs and focus areas. Excerpts:
How is the insurance portfolio doing post GST rate cut?
The GST cut is a positive step, and in many ways, a potential game changer. You can already see its impact in the kind of growth the industry has seen in health insurance in Q3. The momentum in retail health has accelerated after the GST rationalisation. In the last three months, our retail health segment grew 44%, compared to the 30% range earlier. On the product side, we responded quickly by launching Health Alpha, designed to be simple and flexible. We have opened 30 health branches in Telangana and Andhra Pradesh, which we see as underpenetrated markets. Health remains our most focused segment, and we are committed to sustaining this growth by combining relevant products, strong claims experience, and deep distribution reach.
Are record auto sales translating into meaningful motor insurance business?
Post the GST cut, we have clearly seen an uptick in vehicle sales. Motor insurance growth was relatively muted in the first half of the year. But by the end of the third quarter, industry growth picked up to about 9%. Our motor insurance business has grown by 19%, ahead of the industry’s 8% growth in the first nine months. The growth has come through both own damage (OD) and third party (TP) segments. Our mix is well balanced between new and old vehicles, as well as between OD and TP segments. Motor overall contributes about 35% to our total portfolio, with OD making up for roughly 16% and TP about 19%. Within the motor book, new vehicles account for 31%. We have also seen a noticeable jump in OD after the GST cut, and this trend continued in January as well.
What is the ideal product mix that you are looking at?
We have built a well-diversified portfolio. Currently, motor accounts for about 35% of the business, health around 24%, personal accident 12%, crop 12%, and fire about 12%, with the remaining segments contributing in the range of 1–2% each. This gives us a very balanced mix across retail and commercial lines. Going forward, we would like to see a slightly higher contribution from health – from 24% to around 26%. Beyond that, we expect the mix across other lines to remain broadly stable. I believe we have one of the most balanced portfolios in the industry.
Irdai and the RBI have been flagging high distribution costs. What’s your view?
High distribution costs are a reality. But product and channel diversification can really help. For instance, if we were to increase our motor insurance portfolio from 34% to 40%, it could create pressure on costs. That’s why we are very deliberate about keeping a balanced portfolio across segments and channels. If you look at our distribution channels, around 21% of our business comes from bancassurance and 22% from corporate clients, both of which are relatively low-cost channels. OEMs and agencies together contribute about 33%, which tends to be higher on cost, especially in motor insurance.
On the other hand, SME contributes around 4% and crops about 12% which are again lower-cost segments. By keeping this mix well balanced, we are able to offset higher-cost businesses with lower-cost ones and manage our overall costs efficiently. That said, the regulator allows up to 30% (of gross written premiums) for the non-life industry. I think it is quite sufficient for the industry and most of the players are within that limit. We are at around 28%, which gives us an adequate headroom.
What is your growth outlook?
So far, we have delivered close to 15% growth, which is about 1.7 times the industry growth. Our focus has been to grow at 1.3 times the industry. That continues to be our guiding framework, rather than targeting a specific absolute number. The industry itself is evolving every month, with new challenges and opportunities emerging and we remain focused on increasing our market share while maintaining quality growth. January was particularly strong for us. SBI General has crossed around ₹2,000 crore in a single month in January, which gives us confidence going into the last part of the year. We are not capping our growth with a fixed number. We will grow as much as the business opportunity allows, provided it is quality business.