General Insurance: Premium growth up 7% in July; retail health leads

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August 21, 2020 1:15 AM

Investment by health insurers in digital renewal of policies pays off

The overall muted environment for new auto sales continues to put pressure on motor premiums.The overall muted environment for new auto sales continues to put pressure on motor premiums.

General insurers reported 7% year-on-year (y-o-y) growth in premiums (excluding crop) in July 2020, almost similar to 8% growth in June. July growth was led by 33% y-o-y growth in fire and robust 18% y-o-y growth in health, although offset by 6% y-o-y decline in motor premiums. Retail health was up 48% y-o-y.

Motor remains weak
Motor premiums declined 6% y-o-y in July 2020 versus 1% growth in June. Lower new vehicle sales (4-wheelers down 5% y-o-y and 2-wheelers down 15% y-o-y) continue to drag overall premiums. In third-party business (total premium down 8% versus 4% growth in June), private players’ premiums were down 6% y-o-y while public sector insurers (PSUs) were down 11% y-o-y. In the motor own damage segment (premium down 3% in July and June), PSUs were down 10% y-o-y while private players were flat.

The overall muted environment for new auto sales continues to put pressure on motor premiums.

Go Digit, SBI and ICICI Lombard fare better than the rest. Among key players, new-age player Go Digit reported strong 18% y-o-y growth. SBI reported stellar 55% y-o-y growth in motor led by 1.1X y-o-y jump in third-party; the company reported better than industry growth for the third consecutive month in a row.

Strong traction in retail health
Overall growth in the health business was robust at 18% y-o-y (10% y-o-y in 4MFY21). Even as growth in retail health was strong at 48% y-o-y and group health at 25%, 63% y-o-y decline in government health premiums was a drag. Standalone health insurers reported 45% y-o-y increase in health premiums led by 69% y-o-y increase in the retail health business. Private players were up 25% y-o-y while PSUs were flat y-o-y.

Increasing risk aversion among consumers, strong uptick in demand for new Covid-related policies (Corona Kavach and Corona Rakshak) and penetration among mass segments through the newly launched Arogya Sanjeevni plan are likely drivers.

Growth in retail heath was strong at 48% y-o-y. Investment by health insurers in digital renewal of policies has likely paid off. Standalone health insurers reported strong 69% y-o-y growth in retail health in July 2020 (higher than 12% y-o-y in FY2020). Private players were up 50% y-o-y in retail health insurance premiums with 1.7X y-o-y growth for Reliance General, 99% for Tata AIG and 60% for Iffco Tokio. PSU players were up 21% y-o-y.

Fire retains strong growth trends
Fire insurance premiums grew 33%
y-o-y in July 2020. This was likely driven by rise in reinsurance rates by GIC. The reinsurer increased property reinsurance rates in March 2019 (average rise of 2X) for eight occupancies (comprising 35% of industry volumes) and subsequently for all 291 occupancies from January 2020. PSUs reported strong 30% y-o-y growth in fire insurance. Private players were strong as well, up 36% y-o-y.

Edited extracts from Kotak Institutional Equities Research report

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