5 takeaways for general insurance from last year

1. Online validation

Acko and Go Digit, the two fastest growing companies in the non-life segment in 2021-22, are both challenging the industry’s historic sales model. Among the youngest, their two business models revolve around the online space. Both were licensed in September 2017. While Acko’s latest gross premium growth is on a small base, Go Digit is already ranked 13th out of 25 comprehensive non-life insurers. In 2021-2022, it overtook Future Generali India, Universal Sompo and Royal Sundaram.

For Acko as for Go Digit, the health and automobile segments, the two pillars of non-life insurers, are driving growth. Compared to the industry average of 65%, these two segments accounted for 74% and 92% of Go Digit and Acko gross premiums respectively. These numbers indicate a shift in consumer habits and a business case for selling insurance plans that have historically been sold offline through the internet, either wholly or in part.

2. Two pillars

In 2021-22, the health and motor segments accounted for 65% of gross premiums collected by the non-life insurance sector. Seven years ago, in 2015-2016, it was 72%. Thus, while the share of healthcare and automotive has declined slightly, a dependence on them for volumes and growth remains. In recent years, healthcare has overtaken automotive as the leading non-life segment. In 2021-22, which contained the second and third waves of the covid-19 pandemic, healthcare widened its lead over the automobile.

Despite being the largest of the nine non-life segments, health saw the third fastest gross premium growth in 2021-22, at 25%. This was more than double the overall industry growth of 11%. Over the previous three years, the health branch had recorded an average growth of 16% in gross premiums. In health as in automobile, insurers can also levy an increase in premiums.

3. Health swings

For non-life insurers, while the health segment has seen revenue growth, profitability is more elusive, especially for public insurers. Until 2018-19, the incurred claims ratio – the value of claims paid to gross premiums collected – for the healthcare segment was over 90%. Autos, too, were on the rise, challenging the profitability of insurers.

The insurers have not yet published their incurred claims numbers for 2021-2022. But given the surge in hospitalizations due to covid-19 and the anecdotal data available, insurers anticipate a slippage in the profitability of their health portfolios in 2021-22. For example, ICICI Lombard General Insurance, a listed company, recorded an operating loss of 380 crores in its healthcare segment in 2021-22, against an operating profit of 186 crore in 2020-21. Going forward, as covid-19 vaccines provide protection against hospitalizations, a return to profitability, through more policies sold, is likely in 2022-23.

4. PSU pains

Among non-life insurers, one segment has its work cut out for it: the four state-owned non-life insurers. In 2021-22, they faced strong growth pressures, and three of the four lagged the industry average. In addition, two of them, National Insurance and United India, have indeed noted a drop in premiums collected. For both, the healthcare segment barely grew, auto shrank, and crop insurance saw a massive decline. Over the past year, New India Assurance’s share price has fallen 22%, even as the broader market has gained 21%.

Their performance has additional significance. The life insurance company Life Insurance Corporation, the largest life insurance company in the country, is about to go public. Many things are tied to this decision: from how much the government can get out of this sale to the future returns that accrue to shareholders. So far, the precedent set by state-owned non-life insurers is not encouraging.

5. Come a cropper

Another segment of the non-life industry that showed signs of concern in 2021-22 was crop insurance. These are insurance policies sold to farmers to protect them against weather-related losses on their agricultural products. An industry pullback in this important risk management tool comes at a time when the Indian farmer is stressed, and policy options that protect their downside while boosting their income are the need of the day.

Overall, the industry saw premiums collected from crop insurance fall by 5% in 2021-22. Within this, the Agriculture Insurance Company, which specializes in crop insurance, recorded a 16% increase in its premiums. But the group of comprehensive insurers saw crop insurance premiums fall an alarming 18%. This included the four state-owned general insurers. Only Reliance General and HDFC Ergo have expanded this segment. As the country heads into another agricultural season, these numbers need to be watched.

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