Insurance: Non-life business now enters development stage

After playing second fiddle to the life insurance industry for several years, the non-life business has roared back into growth mode. In the first six months of the current fiscal, the industry has recorded 23% growth and there are signs that profitability has improved as well.

“In a stable price environment, the non-life industry should grow by 2-2 .5 times the rate of GDP growth. What we are now seeing is some stability in pricing coupled with opening up of hitherto untapped sectors because of government schemes like the Rashtriya Swastha Bima Yojana,” said ICICI managing director Bhargav Dasgupta .
The growth rate in the first half is almost twice the 13% growth recorded in the whole of 2009-10.

The last time the non-life industry saw such growth was in 2005-06. After that, the insurance regulator freed pricing on all lines of businesses which led to a fall in prices. While the reduction was as high as 80% in the property insurance, the competition also ensured that prices of health and motor insurance — the fastest growing segments were kept under check despite high claims ratio.

“Pricing has improved in health, but in parts of motor insurance, it continues to remain very competitive,” said Mr. Dasgupta. What has kept the price war alive was the continuous entry of new players in the market who were willing to sacrifice margins to build up an underwriting book.

For the first half of the current fiscal, private insurers have recorded total premium of . 9,204 crore against. 7,312 crore in FY10 — recording a growth of 25.9%. Stateowned insurers have collected total premium of . 14,500 crore in the first half of FY11 against . 11,184 crore in the previous year — resulting in a 21% growth.

While health insurance continues to be a major driver of growth — with a 40% rise in health premium in the first half of FY11, all other segments, barring property insurance have recorded a healthy growth. Health insurance today accounts for more than one-fifth of total premium in the country.

Aviation insurance, which has seen some price hardening, coupled with an increase in fleet size, has grown by 40% in the first half. Marine Cargo, which is a reflection of trade in goods, grew 26.3%.

Among companies, HDFC Ergo continues to be one of the most aggressive growing by 49%. ICICI Lombard General Insurance — leader among private companies — has grown 32%. Tata AIG General has also managed a 33% growth despite its foreign parent’s troubles internationally.

Reliance General Insurance , which is currently in merger talks with Royal Sundaram General Insurance is the only private insurer to have shown a drop in premium income (-24 %).