The motor insurance business of insurance firms declined by 15.73 per cent during the period April-August 2020 amid relaxation announced by the state governments in the Motor Vehicle Act and the slowdown in the business due to the Covid pandemic. However, the rise in health and crop insurance businesses aided the sector to report an overall growth of 3.59 per cent during the period.
According to data released by the Insurance Regulatory and Development Authority of India (Irdai), total motor business premium fell to Rs 22,253 crore in the five months ended August 31, 2020 from Rs 26,406 crore in the year-ago period. As much as Rs 1,850 crore decline was reported by four PSU general insurers. “The overall degrowth (in motor) is the result of drop in premium mobilisation in commercial vehicles where the fall in sales of new vehicles has been steep,” said Suryanarayanan V, Managing Director, Cholamandalam MS General Insurance.
Adarsh Agarwal, Appointed Actuary, Digit General Insurance Ltd, said, “In September 2019, we saw a huge increase in motor business which was primarily fuelled by the two wheeler and standalone TP policies for private cars due to the Motor Vehicle Act. Most of the cases were break-in insurances and were due for renewals. At Digit, we had seen a 500 per cent growth in policy issuance especially in the two wheeler segment.”
However, with relaxation by the state governments, this effect faded away in October 2019 itself. Now with the pandemic and lockdown restrictions in select cities, the renewal ratio of this business is expected to remain low. “Apart from this due to the MV Vehicle Act, the minimum claim size has increased and we expect it to automatically increase by 5 per cent each year,” Agarwal said.
“Lesser people have renewed their vehicle insurance this year… customers are of the opinion that the vehicle may not be used for some time in the future due to lockdown or the ongoing Corona scenario. And this majorly happened in Q1. Q2 seems better than Q1 for sure. Brand new vehicle sales took a huge hit in Q1 and have started to pick up now,” said Sajja Praveen Chowdary, Motor Business Head, Policybazaar.com.
“From August 1, IRDAI has asked to discontinue the 3+3 and 5+5 motor policies for brand new vehicles. As a result the ticket size of insurance policies for brand new vehicles has taken a bit of hit and this impact will be seen in the coming months as well,” Chowdary said
The month of September is also expected to show a drop as last year a lot of people purchased due to MV Act and fines. This year many customers from this segment aren’t renewing their policies is the absence of policing on that front.
IRDAI data reveals that health insurance premium income rose 12.97 per cent to Rs 22,903 crore in the April-August period, overtaking auto business as the largest insurance segment. Crop insurance business rose 21.83 per cent to Rs 10,819 crore. The total premium garnered by the general insurance segment rose to Rs 73,968 crore from Rs 71,406 crore a year ago despite the pandemic.
In the crop insurance segment, state-owned Agriculture Insurance Corp (AIC) has reported a 39 per cent increase in premium income to Rs 4,681 crore during the five-month period. India’s largest insurer New India Assurance did not participate in the crop insurance business during the period and reported nil premium income.
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