New Delhi: The 12-months long decline in Indian automobile industry has caused an obvious ripple effect on the motor insurance sector. In the first four months of current fiscal, the gross direct premium income showed a single digit growth of 5.8 per cent at Rs 21,089.78 crore compared to 10.5 per cent spike over the same period a year ago, as per the latest data by the General Insurance Council.
Segment wise, the growth momentum of the third-party (TP) insurance premium slowed down to 11.5 per cent at Rs 12,666.42 crore during April to July 2019 as against a hike of 17.3 per cent in the same period a year ago. Meanwhile, the own damage (OD) motor insurance premium slipped into negative for the first time in recent years to Rs 8,423.36 crore till July 2019, a year on year decline of 1.9 per cent.
In general, every year a good amount of growth is expected in the overall premium majorly due to high volume sales, increase in ticket-size and number of policies but new vehicle sales washout of this year made overall scenario highly discouraging, said industry experts. In the month of July overall automobile sales slipped 18.7 per cent, the steepest monthly fall in nearly two decades.
“There’s a slight competition in market in terms of pricing and that’s why the overall ticket-size has gone down. Hence, the contraction in average size of the policy led to lower premium overall,” Animesh Das, Head of Product Strategy, ACKO General Insurance told ETAuto.
He further said whatever muted growth in TP segment came that is mainly because of the recent hike in premium by the Insurance Regulatory and Development Authority of India (IRDAI).
“Auto sales are already trailing in negative for a long time, so if TP hike wouldn’t have happened (by IRDAI) then even this segment would have been on the negative side,” he added. In the month of June, IRDAI, regulatory body for all the insurance companies in India, has approved the increase in premium of third-party motor insurance for this fiscal. The premium has increased 21 per cent for premium motorcycles and 12 per cent for private cars.
Since auto dispatches and motor insurance are intertwined, the complete sales crash in the first quarter of FY’20 severely impacted the insurance firms, said Sanjay Datta – head of underwriting and claims, ICICI Lombard General Insurance Company.
“Vehicle sales have direct correlation with the insurance premium. We are also hoping that with sales revival during festive season there would be some uptake in motor insurance sector from next month onward,” he mentioned.