Growth was also impacted by the subsequent price war among the insurance companies. In 2007-08, the gross premium underwritten by non-life insurance companies stood at Rs 28,126.29 crore compared with Rs 24,998.41 in 2006-07. In order to retain corporate clients and grab new businesses, insurers had to cut their property premium rates by more than 70 per cent.
"A reduction of premium rates by 70-80 per cent in the fire and engineering portfolio has accounted for a significant fall in the premium underwritten in these segments," National Insurance Chairman and Managing Director V Ramasaamy said.
"The tremors expected after detariffing have not really got pronounced in 2007-08," added Oriental Insurance Chairman and Managing Director M Ramadoss, during a presentation in the Ficci Insurance Conclave.
The fire insurance premium has dipped 15.39 per cent to Rs 3,517 crore in 2007-08 compared to Rs 4,157 crore in the previous year. Of the Rs 639.87 crore loss in premium, the public sector companies accounted for Rs 469.51 crore.
Fire premium for the public sector insurers came down by 17.95 per cent to Rs 2,144.95 crore compared to Rs 2614.46 crore reported a year ago.
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Private insurers fared marginally better, registering a drop of 11.04 per cent to Rs 1,372.32 crore against Rs 1,542.68 crore reported in the previous year.
The four public sector general insurers - New India Assurance, Oriental Insurance, National Insurance and United India Insurance - grew 3.76 per cent to Rs 16,895.70 crore as against a gross premium of Rs 16,282.10 crore reported a year ago. The 10 private insurers grew by 28.85 per cent to Rs 11,231.19 crore from Rs 8,716.31 crore a year earlier.
However, motor insurance and health insurance businesses were the growth drivers with a premium of Rs 2200 crore and Rs 1,800 crore, respectively.
Of Rs 2,200 crore premium in motor insurance, the private sector accounted for Rs 1800 crore, mainly due to the creation of motor third party insurance pool for commercial vehicles. In the case of health insurance, public insurers contributed Rs 1200 crore of the total Rs 1800 crore.
"This belies the theory that health insurance is the forte of private insurers. Health insurance is likely to be the focus area of public sector insurance players," Ramadoss said.
Commenting about future trends, Ramadoss said the compounded annual growth rate of the insurance industry is likely to be around 16 per cent in the next five years in tune with the expected gross domestic product growth of 8 per cent. He said that the premium rates would stabilise from the next financial year.