The nine per cent drop in general insurers premium collection in May was aided largely by a steep fall in the motor segment and the crop insurance segment. This is the second consecutive month where the non-life insurers have seen a drop in premiums owing to the lockdown enforced by the authorities to check the spread of the virus.
The motor segment saw a drop of 23 per cent in May, with the own damage segment dropping 29 per cent and the third party segment de-growing 19 per cent. In the first two months of FY21, premiums in the motor segment dropped 36 per cent to Rs 6,753.6 crore from Rs 10,511.1 crore in the same period, a year ago. However, a month-on-month examination will reveal that May 2020 premiums have grown substantially by 57.6 per cent over April 2020 premiums.
“Lack of purchase of new vehicles is one of the biggest challenges. Normally, that would be compensated for by increasing the coverage net of existing vehicles, a vast majority of which fall out of the insurance net by the third and fourth years. But that would be difficult to do given the lack of distribution feet on street”, said a report by PwC analyzing the negative effect of covid on insurance sector.
Care Ratings in its report said, Motor own damage premium is expected to be affected as long term own damage polices sales for new car sales are proposed to be discontinued in the current fiscal year. Further, not increasing the premium rates for motor third party cover may also have been a contributing in the fall.
Crop insurance, which was one of the biggest drivers of growth for general insurers until two years ago, contracted 48 per cent in May. And in the first two months of FY21, crop segment has seen a 58 per cent drop in premiums to Rs 409 crore from Rs 963 crore. Many private insurers have either shied away from underwriting crop business or have completely stopped writing it.
Few other segments such as aviation, personal accident, credit insurance and marine have also seen de-growth in the month of May.
On the other hand, retail health and fire segments have seen strong positive growth in the same period. Premiums from the retail health segment grew 25 per cent in May while group health registered 3 per cent growth and government schemes saw 12 per cent growth.
Growth in retail heath was strong on the back of increased risk aversion among customers due to Covid-19 and introduction of new dedicated Covid-19 products (sold through proprietary channels or third party aggregator platforms), said Kotak securities in a report.
Standalone health insurers reported strong 34 per cent yoy growth in retail health in May 2020. Investment by health insurers in digital renewal of policies has likely paid off. Private players witnessed 35 per cent yoy increase in retail health insurance premiums in May 2020 on the back of 2x jump by ICICI Lombard), it added.
“Even as the strict lock down has been lifted in June 2020, the non-life insurance industry could witness a fall in the first quarter of FY21, while growth could potentially return in the second or third quarter for FY21. However, muted growth in the economy and decline in key sectors such as auto and manufacturing is expected to negatively impact the non-life insurance industry, which could be offset partially by the pandemic creating a renewed interest in the health segment”, said Care Ratings in a note.