Slowdown visits general insurers, premiums down

Increased focus on top-line growth and economic slowdown have started impacting the general insurance industry.

Increased focus on top-line growth and economic slowdown have started impacting the general insurance industry. Latest data released by insurance regulator IRDA reveals that the gross premium collection witnessed a sluggish growth at 3.1 per cent in October compared with 10.7 per cent in September this year.

Premium collection for the industry stood at Rs 2,456 crore compared with Rs 2,383 crore realised in the same period last year. Of the total collection, the four public general insurers clocked Rs 1,437 crore and private insurers mopped up Rs 1,019 crore. In fact, of the 16 insurance companies, five have witnessed decline in October.

8220;The fall in the premium collection can be attributed to low auto sales and, in turn, dampening sale of motor insurance policies. Also, companies that focussed primarily on their top line are now facing the heat,8221; said M Ramadoss, chairman and managing director, Oriental General Insurance.

8220;Motor insurance is the growth driver for general insurance companies. Fall in sales over the last few months has had a great impact on the motor premium collection. More so, with slowdown in the three major economies, the marine insurance business has also been greatly affected. Economic slowdown in the country has impeded various construction projects, and, in turn, affected sale of construction policies,8221; said Darvesh Panchal, vice-president, Prudent Insurance Brokers.

With a market share of 6 per cent, Reliance General Insurance Company witnessed the steepest fall of 18.5 per cent in premium collection for October. The company collected Rs 148.53 crore last month compared with Rs 182.25 crore collected in October last year. When contacted, a senior official from the company said on the condition of anonymity that the fall was primarily because of the company8217;s focus on top-line growth last year. 8220;Until last year, our focus was more on the top-line growth. However, this year, we shifted our focus to bottom line. The company has already started making profit September onwards,8221; he said.

The biggest player in the private sector, ICICI Lombard, too witnessed negative growth. Premium collection for the company fell by 6.4 per cent last month. In October this year, the company had unwritten gross premium of Rs 316 crore, compared with Rs 337 crore during the same period last year. New India Assurance, which enjoys the largest market share at 18 per cent, also witnessed a decline of 2.7 per cent this month.

Phased deregulation by the IRDA, which freed up pricing for fire, engineering and motor insurance policies starting January 2007, set the premium rates rolling southward. In a run for more business, insurance companies compromised on the underwriting profits and this led to a sharp fall of as much as 60-70 per cent in premium rate.