Underwriting losses fall, profits jump 300% for general insurers

The general insurance industry’s total underwriting losses fell 17.24 per cent to Rs 19,416 crore in the period.

Despite paying a huge sum as claims and facing other challenges and constraints triggered by the Covid pandemic throughout the fiscal, the general insurance industry has seen its net profit rise almost 300 per cent year-on-year to Rs 3,868 crore and underwriting losses decline in FY21.

Two dozen general insurance players including four public sector companies, five stand-alone health players and two specialised players — Agriculture Insurance Company (AIC) and Export Credit Guarantee Corporation (ECGC) — had made losses of Rs 1,403 crore in FY20, as per an analysis based on data from General Insurance Council. The industry’s total underwriting losses fell 17.24 per cent to Rs 19,416 crore in the period.

While the industry saw massive disruption due to the sudden onset of Covid-19 in terms of key parameters like gross premium, policies issued, underwriting losses/profit, combined ratio, gross claims, number of employees, FDI and investment in infrastructure and social sectors since March 2020, it witnessed significant improvement in FY21.

With a gross premium of over Rs 2 lakh crore, posting a 9 per cent growth, of the total 31 players, 17 — including two specialised insurers AIC (along with underwriting profit) and ECGC — posted healthy net profits, including in FY21.

Insurers saw a significant rise in health claims in the year. While FY21 results of the industry point to a turnaround in fortunes, a deeper analysis shows the same was driven by some few one-off factors: motor claims were low amid a prolonged lockdown, agriculture had a good year and property insurance prices remained stable. The insurance industry’s losses were relatively benign due to a variety of reasons in the first wave of Covid, analysts said.

New India Assurance, the largest Indian multinational general insurer, had recorded a net profit of Rs 1,605 crore in FY21 as compared to Rs 1,417 crore in FY20. Its gross global premium had expanded by 6 per cent to Rs 33,046 crore (Rs 31,573 crore of gross Indian premium) in FY21.

However, the first half of 2021-22 has seen a reversal in several aspects. The second Covid wave has hit the health insurance portfolio much harder and motor insurance has seen more intense price competition due to lower demand of new vehicles. Prices for small and medium risks have plummeted in the property space. “All these point towards a much worse performance of the industry going forward,” analysts said.

“Overall, the industry seems to have lost pricing discipline on many lines of business and the effect of increased rates of health portfolio remains to be seen in terms of how it is played out or sustained,” said an official.

Three PSU general insurers — National Insurance Company (NIC), United Insurance (UII) and Oriental Insurance Company (OIC) — have managed to bring down their such losses substantially. Kolkata-based NIC’s underwriting losses plunged from Rs 5,759 crore in 2019-20 to Rs 2,484 crore in 2020-21. All the three PSU general insurers made losses, with OIC posting a loss of Rs 1,519 crore in 2020-21.

Five players, including Bajaj Allianz General Insurance (96.89 per cent), ICICI Lombard General Insurance (99.82 per cent), SBI General Insurance (95.71 per cent), Care Health Insurance (92.89 per cent) and AIC (94.35 per cent), recorded positive combined ratios in 2020-21. Any combined ratio, calculated by dividing the sum of claim-related losses and expenses by earned premium, below 100 per cent means the insurer is making an underwriting profit.

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