General insurance - Key takeaways from call with Secretary General, GI Council of India - ICICI Securities

We hosted the Secretary General of General Insurance Council of India (industry body), Mr. MN Sarna, for a call on "current scenario of general insurance industry". As we hope to emerge out of the Covid crisis, growth challenges remain with industry reporting only 1.4% growth in 8MFY21TD. However, expectations of a price hike in motor TP, manageable Covid claims and recovering growth in motor premiums remain bright spots.

- Regulator has been rightfully conscious to safeguard consumer interests: There have been several incremental measures introduced by the regulator to safeguard consumer interests. These include standardised products in health and property segments (for residences and micro and small industries / units). The latter are almost ready for final approval.

- GI Council has approached the regulator to not stop the sale of credit linked group health products. As per the council, the sale of credit linked group health products does provide a valid safeguard and as such the option should continue to remain available for consumers.

- Can we expect a bigger motor TP hike in FY22? With only three months left, there is little chance of motor TP price hike in FY21. However, the council wishes for a hike in FY22 which should ideally also factor the absence of price hike in FY21. This could be through an additional (mid-single digit percentage) hike for FY21 in addition to the derived hike for FY22.

- Health insurance growth has started disappointing, could be due to affordability issues. Contrary to expectations, there is a tapering in health insurance growth (refer Chart 1) in India. As per GI Council, this could be due to affordability issues with economic problems and unemployment post Covid. Could this also happen in life insurance?

- Crop insurance remains a challenging prospect. While better cropping states continue to use the trust model of crop insurance, weaker states continue to not accept the price hikes. As such, it is likely that profitable insurers will continue to abstain from crop insurance.

- Overall health claims remain manageable with Covid-related claims being offset by lower non-Covid claims. As on 4th Jan'21, Insurance companies have received 0.78mn claims worth US$1.6bn of which 0.6mn claims worth US$795mn have been settled. Ticket size of covid claim has remained at Rs152,000 for the past four months. Dec'20 saw monthly additions of 0.14mn claims (US$312mn) vs 0.13mn claims (US$249mn) seen in Nov'20.

Disclaimer: The opinions expressed by me or the accuracy of facts relating to industry developments are to the extent I am aware of and what I believe is true. Neither me nor the GI Council will take any responsibility for the accuracy of facts or the views expressed in the 4th Jan, 2021 interview, which was carried out on request, purely on a voluntary basis without any remuneration and strictly on 'non-attachment of any liability whatsoever' basis ~ MN Sarna, Secretary General, GIC.

Source : Equity Bulls

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