The non-life insurance players are concerned over their profitability inspite of a steady growth in their business in this fiscal.
The non-life insurance industry or general insurers reported a 19.5 per cent growth in July with gross direct premium underwritten at Rs 20,171 crore for the month compared with Rs 16,884 crore in July 2020. Between April and July, gross direct premium underwritten by the industry was Rs 64,607 crore posting a growth of 15.5 per cent.
According to insurance industry officials, the growth momentum is sustainable as it is driven by higher sales of health policies and online purchases that are easier to execute.
Bhargav Dasgupta, MD and CEO of ICICI Lombard, pointed out to a shifting trend at the company’s earnings call to analysts. “Health insurance continued to show robust growth for the industry which was driven by enhanced awareness due to the pandemic and then an attitude shift of consumers towards protection buying,” Dasgupta had said.
But the growth in business is not reflected in the bottomline, with several companies reporting a drop in profits during the first quarter of 2021-22.
The profitability may also take a hit because of elevated claims on health policies on account of Covid and no revision in the motor third-party rates. The additional risk of externalities such as catastrophic events is a concern.
According to industry data, Covid claims reported during the April-June quarter crossed 1 million compared with 0.98 million cases in the whole of last financial year.
“Q1FY22 has been adversely impacted on account of the rise in claims due to the second wave of the pandemic. Given the opening of the economy and anticipated growth in the same, the industry performance is expected to improve over time,” Care Ratings said in a report.
“However, given that no increase in the motor third-party premium has been announced and Covid claims are persisting (net incurred claims ratio jumped more than 1.5 times in Q1FY22 against Q1 FY21), the sector is expected to witness pressure on near-term profitability,” said the report.
“The impact of the pandemic has reduced in the second quarter. However, the threat of the third wave continues to loom large. Adjusted for Covid-19 related claims the company has performed well in all operating parameters,” said Atul Sahai, chairman and managing director, New India Assurance.
Heading for IPO
Three insurance sector companies are entering the primary market with initial public offerings in the coming months to mop up over Rs 10,000 crore.
These companies are — PB Fintech, which runs insurance brokerage Policybazaar; standalone health insurer Star Health & Allied Insurance Company; and third-party administrator Medi Assist Healthcare Service.
They have already filed their draft prospectus with market regulator Sebi. Over 40 companies have hit the IPO market so far this year, raising close to Rs 70,000 crore.
