Slowdown in growth in retail health due to lower daily new Covid-19 cases and lower volumes in festive season
General insurers reported 5% year-on-year (y-o-y) growth in premiums (excluding crop) in November 2020 (up 7% y-o-y in October 2020 and 9% y-o-y in Q2FY21).
Softening in health offset gradual improvement in the motor business. Motor recovered further to 7% y-o-y (up 3% y-o-y in October 2020 and down 13% y-o-y in H1FY21). Retail health moderated to 17% y-o-y from 30-47% y-o-y growth over July-October 2020.
Among key players, SBI reported stellar ex-crop growth of 33% y-o-y (up 24% y-o-y in 8MFY21; higher than 4% y-o-y for general insurers) while ICICI and Tata AIG were up 7% and 26% y-o-y (up 3% y-o-y and 10% y-o-y in 8MFY21), respectively. Bajaj’s ex-crop business remained weak; down 3% y-o-y. Chola MS was muted at 8% y-o-y (ex-crop).
Retail health moderates from highs
Overall growth in health business was muted at 2% y-o-y in November 2020 on the back of slowdown in retail health to 17% y-o-y from 30-48% over July-October 2020 and muted growth in group health (despite a low base); this however tends to be volatile. Slowdown in growth in retail health was likely an interplay of slowdown in daily new Covid-19 cases in India and lower volumes in the festive season. Private players (excluding HDFC Ergo General) were down 1% y-o-y in retail health (down 15% y-o-y on overall basis) while PSUs were up 11% y-o-y (up 3% y-o-y on overall basis). Among major private players, SBI, Tata AIG and ICICI Lombard slowed down in retail segments to growth of 13% y-o-y, 59% y-o-y, 95% y-o-y and 11% y-o-y from 49% y-o-y, 95% y-o-y and 32% y-o-y growth in October 2020.
Premium for standalone health insurers (excluding HDFC Ergo Health) slowed down to 17% y-o-y from strong 57-66% y-o-y growth over the past three months. Retail health insurance slowed down to 17% y-o-y in November 2020 (30% y-o-y in October 2020) from 41-48% y-o-y growth observed over June-September 2020.
At 17%, growth in retail health has been moderate, lower than 30-40% in the past few months. We expect the growth trajectory to continue or improve as demand for such policies picks up post the pandemic. This segment will however report high loss ratios in the near-term due to significant Covid-related claims and high health inflation for non-Covid hospitalisation and medical procedures.
Edited extract from Kotak Institutional Equities Research report