General insurers delivered 7% (ex-crop) premium growth in FY2021 despite a 2% year-on-year (y-o-y) decline in motor premiums. Fire (up 27%) and retail health (up 28%) were key growth drivers. A gradual pick-up in motor insurance premiums is likely to support growth in FY22, though retail health and fire will likely moderate on a high base.
Motor down 2% in FY2021
Motor premiums increased 22% y-o-y in March 2021 (low base of 7% y-o-y decline in March 2021). Motor premiums have gradually increased over the past few months. Increasing new vehicle sales, gradual rise in freight volumes and utilisation rates supported premiums.
Motor premiums declined 2% y-o-y for FY21 due to weakness in new vehicle sales during H1FY21 and lower freight volumes due to lockdown-related disruptions delaying renewals. We expect motor premiums to report modest growth in FY22 on the low base of FY21 though premium growth remains contingent on increase in auto sales (on a low base), any likely disruption in mobility due to the second wave and hike in motor third-party (TP) premiums (flat since FY20).
Retail health supports growth
Retail health premium was up 29% y-o-y in March 2021 (low base of 4% y-o-y growth in March 2020). On a quarter-on-quarter (q-o-q) basis, premiums increased 37%; Q4 tends to be a strong quarter (q-o-q premium growth of 27-41% over the past three years in March). Retail health premium increased 28% y-o-y in FY2021 (12% y-o-y in FY2020). Strong momentum in the sales of Covid-19 policies and high risk aversion due to the ongoing pandemic are key drivers. However, the lower likelihood of medical checks and substitution of comprehensive policies with Covid-19 policies (the latter tends to have lower ticket) put pressure on premium growth.
The share of retail health insurance premiums in overall general insurance premiums (ex-crop) increased to 16% in FY2021 from 13% over FY2018-20. We believe retail health insurance will remain a key growth driver over the medium term due to increased customer awareness, intent to purchase more post the pandemic, increased push through diversified distribution channels and continued product innovation by insurers targeted at different customer cohorts.
Fire muted on a normalised base
Growth in the fire segment was strong at 27% y-o-y in FY21 (up 35% y-o-y in FY20), but tepid at 8% y-o-y in March 2021 (flat y-o-y in February 2021). Growth in nine months of FY21 at 33% y-o-y was due to price hikes incurred post January 2020 due to the rise in reinsurance rates.
This article was originally posted here
