Third-party motor insurance drives up growth in premiums of general insurers

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Published: October 22, 2019 12:41:40 AM

Most large players were strong on ex-crop basis—ICICI Lombard was up 17% (overall premium down 23%), Bajaj up 24% (overall premium up 1.4X) and SBI GI up 51% y-o-y (overall premium up 88%).

Third party, motor insurance, drive up, growth, premium, general insurer, money, General insurance, traffic fine, health insurance, fire insurance, ICICI Lombard, SBI, Bajaj, HDFC, health premiumGoogle trends showed sharp rise in search of the term ‘motor insurance’ in the last week of August.

General insurance companies reported 18% year-on-year (y-o-y) growth in premium (excluding crop) in September, higher than 7-11% y-o-y growth over the past three months. This was driven by the motor third-party segment (up 38%; 10-18% in past three months) as an immediate reaction of increase in traffic fines. Even as health and fire insurance business remained in a sweet spot, crop business was higher leading to 26% overall premium growth.

Most large players were strong on ex-crop basis—ICICI Lombard was up 17% (overall premium down 23%), Bajaj up 24% (overall premium up 1.4X) and SBI GI up 51% y-o-y (overall premium up 88%).

Motor third-party spikes
Motor insurance premium growth improved to 21% y-o-y in September 2019 after recording a muted 1-10% y-o-y growth in April-August 2019. Motor third-party improved to 38% y-o-y (YTD growth of 16%) due to new traffic penalties. Growth in the private sector improved to 31% y-o-y. PSUs reported muted 7% y-o-y growth, positive growth for the first time year-to-date (YTD).

Own damage business remained weak with 7% y-o-y growth for private players and 21% y-o-y decline for PSUs, leading to a 2% decline for the industry, likely indicating weak new vehicle volumes. Motor OD premiums for Bajaj, ICICI Lombard and HDFC ERGO were in line with industry trends while Acko and Go Digit remained the fastest. SBI General was up 31% y-o-y.

Rise in penalties led to sharp increase in motor third-party premium in September 2019 (up 38% y-o-y, up from 10-18% in the past three months). Growth for private players, for example, Acko and Go Digit, was up 33% as compared to 4-16% y-o-y growth in April-August 2019. PSU players reported 22% y-o-y growth compared to 3% YTD decline in 5MFY20. Among large players, SBI General and HDFC ERGO surprised with 79% growth (-9 to 36% growth in past five months) and 93% y-o-y, respectively. Bajaj was up 53%, from 11-18% in the previous three months.

Google trends suggest peaking out
Google trends showed sharp rise in search of the term ‘motor insurance’ in the last week of August. This likely indicated interest in buying motor third-party polices, as a consequence of increase in penalties for traffic violations. The trends suggest that interest has moderated and implies moderation in third-party premium in the coming months. Thus, the spike due to increase in traffic penalties may be broadly captured in.

Retail health weak
Growth in health premium accelerated to 21% on the back of strong traction in group health (up 1.3X y-o-y). Increase in tariffs in the group business attracted some private players last year; the momentum seems to be sustaining. Government schemes declined 37% y-o-y on a high base.

Retail health business was muted at 8% y-o-y (decelerating from 16% in July 2019), that too largely driven by standalone health insurers (up 23% y-o-y). PSU players reported a muted 6% growth while private players continued to report declines (down 18% y-o-y in September from 14% y-o-y in August and 7% decline in July). On overall basis, private players maintained momentum (28% y-o-y growth, higher than industry) while PSU players (18% y-o-y growth in August) ceded market share to standalone health insurers (22% growth in September).

Edited extracts from Kotak Institutional Equities Research report

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