Strong Growth In General Insurance GDPI Continues In FY24-TD: Report

The general insurance sector has witnessed robust growth, with Gross Direct Premium Income (GDPI) surging by 16.5 per cent in the current fiscal year to date (FY24-TD). 

The growth in the motor insurance segment, which saw a 19 per cent Year-to-Date (YTD) growth, and the growth in the health insurance segment, which registered a 24 per cent YTD growth, have been the main drivers of the surge in GDPI.

Despite the positive growth trajectory, industry insiders underscore the importance of maintaining profitability, particularly in light of certain challenges that have surfaced. One significant concern is the increasing combined ratio observed across all industry players in the previous fiscal year (FY23), which can impact overall profitability.

Moreover, there are room for heightened operational expenditure (opex) ratios, as indicated by the EOM (expenditure on management) guideline. Notably, the analysis reveals that 10 out of the top 18 multi-line players in the sector are operating below the 30 per cent benchmark, and two out of four standalone health insurers (SAHIs) are operating below the 35 per cent mark, all as of Q1FY24.

The situation prompts the exploration of an alternative perspective: that the prevalence of players surpassing the 30 per cent EOM watermark could potentially lead to improved pricing discipline within the market. This could, in turn, help in stabilising profitability levels amidst fierce competition.

Trends in Industry Growth Remain Positive

Non-life insurance companies have reported 13 per cent year-on-year growth in GDPI for July 2023, slightly lower than the 15 per cent growth recorded in June 2023. Among the industry leaders, ICICI Lombard (ICICIGI) achieved a 21.9 per cent YoY growth in July, up from 20.4 per cent in June, while Star Health witnessed a 17 per cent YoY growth in July compared to 19 per cent in June. However, ICICIGI's market share contracted from 9.9 per cent in June to 9.7 per cent in July, and Star Health experienced a marginal decrease to 4.7 per cent in July.

The fire insurance segment demonstrated a growth of 7 per cent and 12 per cent in fiscal year FY24-TD and July 2023, respectively. ICICIGI's market share in this segment experienced a modest 30 basis points decline to 13.6 per cent in July 2023. 

Among the notable performers in the fire segment for July were United India, SBI General, and Future Generali, with year-on-year GDPI growth rates of 46 per cent, 32 per cent, and 27 per cent, respectively. Conversely, Royal Sundaram and New India faced declines of 32 per cent and 8 per cent in GDPI, respectively.

The motor insurance sector showcased a solid growth of 19 per cent in fiscal year FY24-TD and 15 per cent in July 2023. Within this segment, Own Damage (OD) and Third Party (TP) motor insurance demonstrated YoY growth rates of 22 per cent and 17 per cent in July 2023. 

ICICIGI's market share remained stable at 9.8 per cent in July, after a considerable decline in June. Among the top performers in the motor insurance sector for July were Go-Digit, TATA AIG, and Shriram General, posting growth rates of 67 per cent, 27 per cent, and 22 per cent, respectively. On the other hand, SBI General, HDFC Ergo, and Magma experienced declines of nine per cent,  nice per cent, and 10 per cent in GDPI, respectively. Balancing an enhanced combined ratio with market share gains proves to be a challenging endeavor within the motor insurance segment.

The health insurance sector continues to demonstrate remarkable growth, with GDPI surging by 24 per cent in fiscal year FY24-TD and a notable 33 per cent in July 2023. This growth is attributed to a substantial increase in both retail and group health insurance GDPI, which reported growth rates of 18 per cent and 41 per cent YoY, respectively, in July. Star Health, a prominent player in the retail health insurance segment, fortified its market share from 31.9 per cent in June to 32.4 per cent in July. Meanwhile, ICICIGI's market share experienced a slight dip from 3.1 per cent in June to 3.0 per cent in July. Noteworthy gainers in the retail health market share included Reliance General, Raheja QBE, and Shriram General, with impressive growth rates of 69 per cent, 59 per cent, and 54 per cent YoY, respectively. Among the group health insurers, Go-Digit, Magma HDI, and Future Generali emerged as gainers, while the PSU pack faced losses.