1. Online Verification
Acko and Go Digit, the two fastest growing companies in the non-life segment in 2021-22, both challenge the industry’s historical sales template. At the youngest, both of their business models revolve around the online space. Both received their licenses in September 2017. Acko’s latest increase in gross premiums is on a smaller basis, with Go Digit already ranked 13th out of 25 full-stack non-life insurers. In 2021-22, it surpassed Future Generali India, Universal Sompo and Royal Sundaram.
For both Acko and Go Digit, the health and motor segments—two mainstays for non-life insurers—are driving growth. These two segments accounted for 74% and 92% of the gross premiums of Go Digit and Acko, respectively, as against the industry average of 65%. These numbers point to changing consumer habits and a business case for selling insurance plans that have historically been sold entirely or partially offline via the Internet.
2. Twin Mainstays
In 2021-22, the health and motor segment accounted for 65% of the gross premiums collected by the non-life insurance industry. Seven years ago it was 72 per cent in 2015-16. Thus, while the share of health and motor has decreased marginally, the reliance on them for volume and development remains. In recent years, health has overtaken motor as the major non-life segment. In 2021-22, which saw the second and third waves of the Covid-19 pandemic, Health extended its lead over Motor.
Despite being the largest of the nine non-life segments, health registered the third fastest growth of 25% in gross premiums in 2021-22. This was more than double the overall industry growth of 11%. In the last three years, the health segment had registered an average growth of 16% in gross premiums. In both health and motor, insurers are also able to increase premiums.
3. Fluctuations in health
For non-life insurers, while the health segment is providing revenue growth, profitability is more elusive, especially for state-owned insurers. As of 2018-19, the ratio of claims made for the health segment – the value of claims paid to gross premiums collected – was above 90%. Motor was also at a high level, challenging the profitability of insurers.
Insurance companies have not yet released their spent claim numbers for 2021-22. But given the number of hospitalizations due to COVID-19 and the available anecdotal data, insurers are seeing a decline in the profitability of their health portfolio during 2021-22. For example, ICICI Lombard General Insurance, a listed company, reported an operating loss of 380 crore in its health segment in 2021-22 as against operating profit of 186 crore in 2020-21. Looking ahead, as COVID-19 vaccines provide a hedge against hospitalization, a return to profitability, on the back of more policies sold, is likely in 2022-23.
4. PSU’s suffering
Among non-life insurers, one segment has had its job cut out: the four government-owned non-life insurers. In 2021-22, they faced severe growth pressures, with three out of four falling behind the industry average. Moreover, two of them, National Insurance and United India, have actually seen a decline in the premium collected. For both, the health segment has barely grown, the motor has shrunk, and crop insurance has seen a steep decline. In the past one year, the share price of New India Assurance has declined 22%, while the broader market has gained 21%.
Their performance is of added importance. The country’s largest life insurance company, the state-owned Life Insurance Corporation, is being prepared to go public. Much is being decided on that move: how much money the government can raise in future returns to shareholders from this sale. So far, the precedent set by state-owned non-life insurance companies is not encouraging.
5. A harvest coming
Another segment of the non-life industry that showed signs of concern in 2021-22 was crop insurance. These are insurance policies sold to farmers to protect them from weather-related losses on their agricultural produce. A pullback by the industry in this vital risk-management tool comes at a time when Indian farmers are under stress, and policy options that protect their downside while increasing their income are needed today.
Overall, the industry saw a 5% decline in premium received from crop insurance in 2021-22. Within this, the Agricultural Insurance Company, which specializes in crop insurance, registered a 16% increase in premiums. But the group of full-stack insurers saw crop insurance premiums fall by 18%. This included all four state-owned general insurance companies. Only Reliance General and HDFC ERGO expanded this segment. As the country heads towards another farming season, these numbers should be taken into account.
www.howindialives.com is a database and search engine for public data