General Insurance industry to see cautious growth in FY22: Icra

NEW DELHI: India's General Insurance (GI) industry saw its growth slow down to 4% to Rs1.85 trillion in financial year 2020-21 (FY21) from Rs1.78 trillion in FY20, largely the result of the coronavirus pandemic which had led to a stringent nationwide lockdown last year, credit rating agency Icra said.

In FY19, the industry had grown 14%. Sahil Udani, Assistant Vice President and Sector head – Financial Sector Ratings, Icra said, “We expect a 7%-9% growth in GDPI in FY2022, supported by growth in health segment and an uptick in the motor segment. Despite underwriting losses, the sector is expected to report marginal return on equity (3%-4.5%) largely supported by investment income which is highly regulated by the IRDAI."

Public-sector undertakings (PSUs) were slower to adopt to the digital way of things last year in the wake of the pandemic, resulting in a 2% year-on-year decline in business to Rs718 billion in FY21. The private sector, however, reported an 8% YoY increase in gross direct premium income (GDPI) to Rs1.13 trillion during the same period.

In FY21, the health & PA (personal accident) business saw a flat growth of 12%, with PSU entities registering a 2% growth and private sector companies growing 16% last year compared with 19% in FY20. The motor insurance segment grew a modest 2% to Rs678 billion, given the lockdowns last year and a slump in vehicle sales. Fire insurance products accounted for 11% of the overall GDPI during FY21 (8.9% in FY20). Total premium rose 27% in FY21 compared with a growth of 35% in FY20).

"PSU insurers are expected to report marginal GDPI growth of 4-5% in FY22 as most of the public insurers remains stretched on their solvency profile given reported losses. PSU insurers are expected to report high underwriting losses of Rs124 billion to Rs135 billion because of the likely high combined ratio of 121-123% in FY22, driven by the likely high claims ratio (on health and motor portfolio) on uncertainty related to the second wave of pandemic and motor TP tail risk," Udani said.

Icra' analysed the performance of 17 general insurance companies, representing 90% of the industry-wide gross direct premium written (GDPI) during the nine-month period of FY21. Of these companies analysed, four were from the public sector and 13 from private sector.

The PSU entities had high underwriting losses in FY19, and FY20, which resulted in a constrained business growth subsequently. For FY21, PSU players had moderate growth in the health and fire segments, but the motor segment witnessed a decline in business, as per Icra. Private sector players had a higher growth trajectory in FY19 and FY20, and have taken away market share from PSU players. The private sector reported an 8% YoY increase in GDPI at Rs1.1 trillion in FY21.

"The General Insurance (GI) industry saw a bounce back in business growth in H2FY2021, after a sharp decline in H1 due to the pandemic induced lockdowns. New vehicle sales and medical insurance were the key products to pick up in H2FY2021 aiding the growth...ICRA expects consolidation amongst the smaller players in the industry, and the regulatory approval for foreign JV partner (to increase stake till 74%) is expected to provide capital and operational control amongst the smaller entities with a foreign JV," Udani added.

Source: Live Mint