After over 16 years of struggle for consolidating their business in India, private players in the general insurance sector have for the first time in the history overtaken their public sector counterparts to become the most attractive general insurers in the country. With the Government’s consolidation move as well as foreign direct investment (FDI) push in the insurance sector, it is expected that the ongoing trend is likely to continue in the future. While the private insurers grabbed 51.63 per cent general insurance market, the public sector could manage only 48.37 per cent in April.
“The growth in the private general insurance business has an obvious reason as a host of new foreign private players are keen to join the sector. As the Government has opened the door by easing FDI for them, they are aggressively increasing their footprint in India. On the other hand, the Government is mulling the merger on the lines of banking and telecom sectors, where small general insurers, except New India Assurance, are likely to be merged into a big entity to operate in the country,” a top Finance Ministry official told The Pioneer, requesting anonymity.
General insurance industry grew by 16 per cent to Rs12,206 crore on April 30, 2017, in terms of gross written premium or GWP collection as against Rs10,500 crore in the same period last year. In a first, the private sector general insurance firms have overtaken their state-owned peers in terms of GWP market share in April, according to data available with Insurance Regulatory and Development Authority of India (IRDAI).
For last three years, the market share in PSU general insurers has been declining. “The market share of PSU players in general insurance has come down from 55.09 per cent in FY15 to 53.21 per cent in FY 17. While growth in private players rose from 44.91 per cent FY15 to 46.79 per cent in FY17,” the data said.
The industry also witnessed a higher growth of 30 per cent in terms of GWP during fiscal 2017, according to data available with Insurance Regulatory and Development Authority of India (IRDAI). However, the April figure doesn’t include the crop insurance segment that drove growth in the general insurance industry by adding almost Rs18,000 crore in FY17. Crop insurance for the current fiscal will start shortly with Kharif sowing all over the country.
“The entire growth in the industry for the fiscal 2017 is driven by crop insurance which is again the fallout of Government scheme like Pradhan Mantri Fasal Bima Yojana.
Unlike their peers in private sector, public sector insurers are new entrants in the crop insurance segment. Hence, the trend is likely to continue in future too,” the official added.
When contacted to Alamelu T lakshmanachari, who recently took over as Chairman and Managing Director (CMD) of New Delhi-based Agriculture Insurance Company, declined to comment. But National Insurance Company CMD Sanath Kumar is of view that the difference has been mainly in agriculture business, where the private players have shown an increase of more than Rs400 crore, while it has been hardly anything for PSUs.
“This could be mainly due to some adjustment or accounting entries and it cannot be seen as a trend. Further, there has not been any increase in April renewals of mega risks with PSU insurers and PSU insurers’ growth would pick up in the coming months,” he said.
General Insurance Nationalisation Act was passed by the Government in 1972. Four PSU general insurance companies were formed in 1970s after merging over 100 firms in existence then. The four state-owned companies are New India Assurance Company ltd; United India Insurance Company ltd; Oriental Insurance Company ltd and National Insurance Company ltd. Private GI companies came into existence after the sector was opened in 2001. At present, there are 18 general insurance firms in the private sector. In 2001, private players in GI business started entering into the market and gradually strengthened their foothold as against PSU counterparts to grab their share.
PSUs had more than 50 per cent market share until FY17, but in April, 2017 (FY18), this figure changed dramatically. During this month PSU grew by only 5.42 per cent, while private insurers witnessed a significant growth by 27.88 per cent. These percentages are out of total GWP collected during the periods.
The GI business is the first financial sector, where PSUs have lost major share. With more private GI companies set to be launched and 3 of the PSU insurance companies to be merged, hence the trend of April is likely to continue further.
As per IRDAI data, after the increase in the third party motor premium since April 1, the industry, as a whole, has recorded the highest growth in the portfolio, a 23 per cent rise in total premium to Rs1,888 crore. “The health portfolio went up by 9 per cent, from Rs3,277 crore to Rs3,568 crore. However, there has been degrowth in aviation and marine portfolios in the month,” the data showed.