With a 55 per cent marketshare, private general insurance companies outpaced their public sector counterparts in 2017-18, growing at 22 per cent, according to a report. Overall general insurance grew at a slower rate of 17 per cent in FY18, where the private sector growth continued at a faster pace of 22 per cent compared to 13 per cent by the PSUs during FY18, Icra said in a report.
Owing to the sizeable difference in growth rates, the share of the private players in the overall market improved to 55 per cent in FY18 from 53 per cent in FY17, it added. “Private players continued to lead the recovery in the industry with a year-on-year growth of 22 per cent in FY18 from a growth of 39 per cent in FY17. In FY18, the growth in private sector players was due to higher GDP from health and motor business,” Icra group head, financial sector ratings, Karthik Srinivasan said. He said, private players will continue to display strong growth in motor and health.
“Crop insurance growth for the private players will continue but not as rapidly as 2016-17 growth rates, as PSU insurance companies have started bidding for business in 2017, and loss rates have increased in FY18,” Srinivasan said. On the other hand, PSU players’ growth was muted in FY18 to 13 per cent as the companies rationalised growth to reduce underwriting losses.
The slowdown in business was evident in the fire, property segment and motor own damage (OD) segments, it said. However, health and motor third-party (TP) bucked the trend, and the PSU insurers grew rapidly in these segments, it added. Icra expects the PSU insurers to improve pricing in Motor OD segment, and be more selective in health segment in FY19, resulting in slower growth but a relatively better underwriting profitability, the report added.
Meanwhile, Icra said it expects the private sector general insurers requiring Rs 12-30 billion of capital infusion in FY19, to maintain the current growth rate of 17-20 per cent, it said. However, if the private sector continues with its current profitability (13 per cent for the select private players), the capital requirement would fall to Rs 12 billion. With insurance companies, allowed to raise tier 2 bonds, companies might explore this route to raise their solvency levels.
As per estimates, insurance companies have raised around Rs 25.8 billion till date by way of tier 2 bonds, with more companies looking at this route to bolster their solvency levels, the report said. It said, PSUs are likely to meet a large part of capital requirements through the large unrealised gains on their equity investments. However, since no such comfort is available for the private sector players, their requirements are likely to be met through external sources, it added.