General insurers see a bleak year

New Delhi: General insurance companies may turn in tepid performance this financial year. While the industry posted business as high as Rs 1.5 lakh crore in 2017-18, it is struggling hard to touch this mark this year due to lukewarm growth.

In the first nine months this fiscal year ending March 2019, general insurers have not even crossed Rs 1.2 lakh crore in business.

Ayushman Bharat, the government’s flagship health insurance-cum-health care project that was expected to drive rapid growth, was an utter disappointment as many states have opted for trustee or hybrid models, leaving very little room for the insurers.

Besides, Pradhan Mantri Fasal Bima Yojana, or PMFBY, has also not reflected substantial growth owing to stiff competition, resulting in very low premiums realisation. Over and above, states like Bihar have also opted out of the scheme due to political reasons.

Worse, the Rs 4,000-crore re-capitalisation as announced by Centre for the three public sector insurance firms before their merger as a precursor to listing, didn’t happen so far. This also came as a jolt for the industry. “The interim Finance Minister Piyush Goyal kept mum on the 4,000-crore re-capitalisation package,” chief of a public sector general insurance firm told Financial Chronicle on condition of anonymity.

“Though the sector is trying hard to add growth, I think the industry’s aspirations would not be met and at current pace we are likely to end up bad,” he added.

Financial performance of general insurance companies, especially state-owned companies, have seen low growth in the current financial year too. At least two firms—National Insurance India (NII) and United India Insurance (UII) — significantly lost their market share.

While NII lost market share from 10.78 per cent in December 2017 to 8.63 per cent in December 2018, UII witnessed a slide from 11.02 per cent to 9.27 per cent.

For UII, the loss before tax in Q2FY19 was Rs 868 crore as against Rs 36 crore in same quarter last fiscal. For NII, the loss was Rs 707 crore in Q2FY19 as against a modest profit of Rs 90 crore in Q2FY18. For Oriental Insurance Company (OIC), the loss figure stood at Rs 240 crore in Q2FY19 against a profit of Rs 200 crore in same quarter last fiscal.

Overall, the three insurance companies have posted huge losses in Q2FY19, given their tepid growth in premium and enhanced provisions. “There were various factors that led to their losses, including manpower crunch and lack of clarity on merger. Further, the firms had to make huge provisions over third party motor losses,” said a senior official of the public sector general insurance sector.

If segment-wise growth is analysed, commercial vehicle insurance has been the most hit in their businesses. Last year, the government made amendment to the Motor Vehicle Act, 1998 that stipulated almost ten-fold increase in the minimum compensation for injury or death in road accidents.

“While higher provisioning norms apply to both private and public sector firms, the private sector companies have been more prudent in selecting the category mix. For example, they remained cautious in exposure to riskier insurances such as commercial vehicles,” said a top UII official, who looks after motor insurance wing of an insurer.