Non-life insurance sees robust growth

In 2017, premium collected on account of crop insurance scheme is likely to significantly add to investable pool of non-life insurers

Backed by a healthy growth in motor and health insurance, investments of non-life insurance companies rose by around 128 per cent in the past five years. A majority of the investments got channelised into government securities.  

According to the data from the Insurance Regulatory and Development Authority of India (Irdai), total investments of non-life insurance companies as of March 31, 2016, stood at around Rs 188,126 crore, against Rs 82,520 crore as of March 31, 2011, a growth of 128 per cent. 

In 2017, the premium collected on account of crop insurance scheme is likely to significantly add to the investable pool of non-life insurers. Informal estimates suggest, total premium collected from the first year of operation of Prime Minister Fasal Bima Yojana (PMFBY), launched in February 2016, is expected to be around Rs 22,000 crore.  

According to Sanjay Datta, chief underwriting and claims, ICICI Lombard General Insurance, much of the growth of non-life insurance has been driven by retail participation, particularly motor and health insurance. At present, at ICICI Lombard, retail accounts for about 65 per cent of the total premium collection, which was around 50 per cent about two to three years ago.

“Over the last two to three years, we have seen a 15-16 per cent growth in premium, mostly driven by health and motor insurance,” said Datta. 

The motor insurance business continued to be the largest non-life insurance segment with a share of 43.89 per cent in 2015-16, against 44.14 per cent in 2014-15. It reported growth of around 13.17 per cent in 2015-16, against 10.52 percent in 2014-15. 

However, one of the highest growth in the general insurance sector comes from health insurance. The premium collection in this segment stood at Rs 27,457 crore in 2015-16, against Rs 22,636 crore of 2014-15, a growth of 21.30 per cent. Further, after the IPO of the public sector general insurance companies, the retail penetration of non-life insurance is likely to increase due to heightened competition to grab a market share. 

“After the successful IPO, the general Insurance companies in the fray would secure capital which would enable them for higher growth. Currently, due to solvency margin restrictions , growth is measured  and controlled. This would change as the insurers would be free to expand and this might result in higher discounts as they would try and increase the market share. As of now there is no scope for discounts , but the picture would change once the capital flows in,” said K Sanath Kumar, chairman and  managing director, National Insurance Company.

Much of the investment brought about by growth in general insurance has flown into government debt over the past five years.  General insurance companies are mandated to invest about 30 per cent of their premium in government securities. However, most insurance companies have been investing more than required in government securities. 

As of March 31, 2016, nearly 27 per cent of investments of general insurance companies went into central government securities, while around 12 per cent went for state government and other approved securities. 

At National Insurance, nearly 41 per cent of investments are into government securities, according to a senior official of National Insurance. Non-life insurance industry underwrote total direct premium of Rs 96,379 crore in for year 2015-16, against Rs 84,686 crore in 2014-15, registering a growth rate of 13.81 per cent as against 9.20 per cent growth rate recorded in the previous year. 

However, the overall penetration of general insurance in India continues to be very low. As on 2015, the penetration of non-life insurance in India was around 0.72 per cent, against 2.72 per cent penetration of life insurance.