General insurance - Fire, health remain growth drivers, rising Covid claims a concern - ICICI Securities

Fire and health remain growth drivers while aggregate premiums have grown by ~6-12% YoY for ICICI Lombard and the industry for last 3 months. Rising Covid claims is an industry concern. This could lead to price hikes for health insurance products.

- Aggregate industry monthly non-life insurance premium grew 10% YoY in Aug'20 driven by fire (29% YoY) and health premiums (25% YoY). Motor segment saw gradual improvement as Aug'20 GDPI declined 2% YoY vs 6% decline in Jul'20.

- ICICI Lombard (ICICIGI) has consistently outperformed in motor and fire but lagged in health. Total motor premiums for ICICIGI changed by +13%/-9% YoY in Aug'20/FY21TD compared to industry change of -2%/-16%. Fire premiums for ICICIGI changed by +46%/+47% YoY in Aug'20/FY21TD compared to industry change of +29%/+35%. Health premiums for ICICIGI changed by +4%/0% YoY in Aug'20/FY21TD compared to industry change of +25%/+13%. FY21-TD, ICICIGI has registered flat GDPI till Aug'20 compared to +3.6% growth at aggregate industry level.

- Bharti AXA total premium ex-crop declined by 3%/10% in Aug'20/FY21TD. Health, Motor, Fire and Crop grew by 5%, -29%, 58% and 19% respectively in FY21-TD.

- Will insurers take price hikes in health premium to offset the rising Covid claims? Media reports indicate that there have been 207,000 COVID-19-specific claims for an amount of Rs33bn till 10th of September. Claims till end of August was Rs27bn which is ~12% of FY21TD health GDPI. This rising Covid claims coupled with expected normalisation of non Covid claims can lead to hike in health premiums. Our sample of 25 health insurance schemes of major general insurers for family floater polices (husband-age 35, wife and 2 children) with sum assured of Rs500k-Rs1mn indicate no price hike in FY21TD.

Source : Equity Bulls

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