Growth in nine months of FY21 at 33% y-o-y was due to value hikes incurred post January 2020 due to the rise in reinsurance prices.
General insurers delivered 7% (ex-crop) premium development in FY2021 in spite of a 2% year-on-year (y-o-y) decline in motor premiums. Fire (up 27%) and retail overall health (up 28%) have been important development drivers. A gradual choose-up in motor premiums is most likely to assistance development in FY22, even though retail overall health and fire will most likely moderate on a higher base. Motor down 2% in FY2021
Motor premiums improved 22% y-o-y in March 2021 (low base of 7% y-o-y decline in March 2021). Motor premiums have progressively improved more than the previous handful of months. Increasing new automobile sales, gradual rise in freight volumes and utilisation prices supported premiums.
Motor premiums declined 2% y-o-y for FY21 due to weakness in new automobile sales throughout H1FY21 and reduced freight volumes due to lockdown-associated disruptions delaying renewals. We anticipate motor premiums to report modest development in FY22 on the low base of FY21 even though premium development remains contingent on boost in auto sales (on a low base), any most likely disruption in mobility due to the second wave and hike in motor third-party (TP) premiums (flat because FY20).
Retail overall health supports development Retail overall health premium was up 29% y-o-y in March 2021 (low base of 4% y-o-y development in March 2020). On a quarter-on-quarter (q-o-q) basis, premiums improved 37% Q4 tends to be a sturdy quarter (q-o-q premium development of 27-41% more than the previous 3 years in March). Retail overall health premium improved 28% y-o-y in FY2021 (12% y-o-y in FY2020). Strong momentum in the sales of Covid-19 policies and higher threat aversion due to the ongoing pandemic are important drivers. However, the reduced likelihood of health-related checks and substitution of extensive policies with Covid-19 policies (the latter tends to have reduced ticket) place stress on premium development.
The share of retail overall health premiums in general basic insurance coverage premiums (ex-crop) improved to 16% in FY2021 from 13% more than FY2018-20. We think retail overall health insurance coverage will stay a important development driver more than the medium term due to improved consumer awareness, intent to buy more post the pandemic, improved push by means of diversified distribution channels and continued item innovation by insurers targeted at various consumer cohorts.
Fire muted on a normalised base Growth in the fire segment was sturdy at 27% y-o-y in FY21 (up 35% y-o-y in FY20), but tepid at 8% y-o-y in March 2021 (flat y-o-y in February 2021). Growth in nine months of FY21 at 33% y-o-y was due to value hikes incurred post January 2020 due to the rise in reinsurance prices.
Edited extracts from Kotak Institutional Equities Research report