Motor insurance premiums register modest growth in October, while health sees a pick up

• Motor insurance business sees modest growth in October as competitive intensity rises.
  
• New-age insurers like Digit and Acko continued to display substantial growth rates of 35-38% in motor insurance premiums.
  
• Standalone health insurers demonstrated a faster growth pace, growing at 27%, surpassing the growth rate of private general insurers at 19%.
  

In October 2023, non-life insurance industry grew at a modest pace of 10% year-on-year. The industry’s muted growth was driven by the motor insurance business, which witnessed a mixed growth scenario despite the festive season that tends to see higher car sales. Overall, the premium growth was modest, registering a 9% year-on-year (Y-oY) increase.

According to analysis done by Kotak Institutional Equities, the health business fared better, with 23% in retail health, driven by standalone health insurers (up 27%) and private general insurers (up 19%).

However, within the motor insurance landscape, there was a contrast between the performance of motor OD and third party (TP) premiums. The motor OD segment exhibited a growth of 12%, while motor TP experienced a decline of 7% Y-o-Y.

This period coincided with robust volume growth in the domestic automobile industry, with passenger vehicles (PVs) witnessing a 17% Y-o-Y increase and two-wheelers (2W) showcasing a growth of 42%. The surge in vehicle sales in October 2023 contributed significantly to the overall motor insurance dynamics.

According to Kotak, the growth patterns in the motor insurance sector seemed to be influenced by several factors. First, it is likely that general insurers might have adopted strategies involving lower tariffs or premiums for motor own damage (OD) policies, contributing to the uptick in its growth.

Simultaneously, a probable decrease in renewals for motor third party (TP) policies could be linked to the culmination of the mandatory 5-year third party insurance for Two-Wheelers, implemented in September 2018, with the 5-year term expiring this month.

New-age insurers like Digit and Acko continued to display substantial growth rates of 35-38% in motor OD premiums. However, the competition from these players might have led to lower ticket sizes, indicating a competitive environment within the industry.

Retail health picks up, while group health sees a decline

The report also points out that in October 2023, there was a rise of 23% Y-oY in the retail segment of the health insurance sector, marking an increase compared to the 18-20% growth observed in the preceding six months.

Specifically, standalone health insurers (SAHIs) demonstrated a faster growth pace, growing at 27%, surpassing the growth rate of private general insurers (GIs) at 19%. Public sector undertaking (PSU) insurers also posted a growth, recording a growth of 17%, a big improvement from the 3-10% range seen in the past six months.

This growth trend was further evident in the group health insurance sector, where SAHIs outpaced private GIs, showcasing a robust 41% Y-oY growth compared to the latter's 36% Y-o-Y increase.

However, the overall performance of group health premiums experienced an 8% Y-o-Y decline, primarily due to the decline of 42% Y-oY in public sector undertaking (PSU) insurers' contributions, exerting a drag on the collective performance of the sector.