New Delhi: Rating agency Icra Ltd expects the GDPI of the general insurance industry to grow 10-12% on a year-on-year basis in FY13, led by higher growth in health and commercial business sectors as well as awareness of medical insurance and This will be due to increase in economic activities.
The industry’s Gross Direct Premium Income (GDPI) growth has recovered to an estimated 11% in FY12 as compared to a growth of 4% in the previous year on resumption of economic activities already following a decline in Covid-19 infections Had happened.
The GDPI of PSU insurers is expected to grow marginally at 4-6% in the current financial year, while that of private insurers is estimated at 13-15%. However, economic uncertainty due to structural challenges in the automobile industry and rising commodity prices amid geopolitical crises have reduced the risk to this growth rate.
“The GDPI of private sector insurers grew at a faster rate of 14% (E) in FY 2022 as compared to the 5% (E) growth witnessed by Public Sector Undertaking (PSU) insurers. Gross premium from health segment experienced a growth of 26% in 11M FY2022, while fire segment premium grew by 8% in 11M FY2022 despite partial lockdown across the country. After declining in FY2021, the motor business posted a muted 11.4% growth in FY2022 on a lower basis due to structural challenges in the automobile industry. However, the GDPI from the crop business declined by 20% in 11M FY2022, mainly due to a significant drop in the PSU business,” said Sahil Udani, assistant vice president and sector head, financial sector ratings, Icra.
ICRA analyzed the performance of 18 general insurance companies during FY12, which collectively represent nearly 90% of the industry-wide Gross Direct Premium (GDPW). Of these, four were from the public sector and 14 were from the private sector. Industry performance includes all players in the general insurance industry, while the Financial Performance Analysis section and outlook pertains to the 18 entities listed earlier.
With the rise in health claims, the combined ratio across the industry deteriorated to 119% in 9M FY21 from 112% in 9M FY22. Covid claims accounted for 6% of the total number of health claims paid in FY 2011 and are expected to be 11-12% of the total number of health claims paid in FY 2012. The combined ratio for the industry is expected to improve in FY13, driven by lower health claims and a potential improvement in risk pricing by insurers.
Icra expects the combined ratio for PSU insurers to moderate marginally to 124-126% in FY12 from 124-126% in FY12, supported by various cost-cutting measures directed by the Center and improved claims performance Is. However, PSU insurers expect net losses to continue in FY23, with negative RoAEs. Private players with better risk pricing and underwriting practices are expected to report a combined ratio of 106-108% in FY2023, with RoAE at 12-14%.
“With the fall in the combined ratio, PSU insurers reported higher net loss in 9MFY2022. To enhance the solvency profile, the Government of India (GoI) infused fresh equity capital of Rs. 5,000 crore in vulnerable PSU insurers in March 2022. Accordingly, ICRA expects the solvency position of PSU insurers to be ~1.67x or ~1.39x by March 31, 2022, considering 100% or 50% Fair Value Change Account (FVCA). tolerance, respectively. The rating agency expects government support in the form of regulatory tolerance or fresh capital to weak PSU insurers in FY2023.