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Private general insurers push up market share, competition set to intensify | Insurance News

general insurance, insurance companies, insaurance sector, Private insurers, market share, Private sector, economy news, indian express news


Private sector non-life insurance companies have increased their market share in the financial year 2023-24 (FY24) amid intense competition in the sector, mainly in the health and motor businesses. The overall market share of private non-life insurers has witnessed a sustained increase to 65 per cent for FY24 from 62 per cent in FY23 and 59 per cent in FY22 highlighting the persistent growth differential between the public and private sectors.

The non-life general insurance industry reported a lower growth during FY24 with a premium income of Rs 2.89 lakh crore, a rise of 12.78 per cent compared to the 16.3 per cent growth in premium income at Rs 2.56 lakh crore in FY23, according to figures released by the General Insurance Council.

Competition is likely to increase, especially in the health segments as new companies have commenced operations while others are waiting in the wings to enter the segment. Till date, motor third party rate hike has not been announced for FY25, which could impinge on the growth.

Additionally, tensions around the Red Sea and the Iran-Israel conflict may impact the marine segment. However, intensified competition, an uncertain international geopolitical environment and elevated inflation may negatively affect economic growth and subsequently impact the non-life insurance sector.

The industry’s growth is driven by the health and motor insurance segments. However, compared to last year, there was a decline in growth due to a fall in liability, crop insurance and credit guarantee, while fire and marine segments reported subdued growth numbers compared to last year.

Private general insurers push up market share, competition set to intensify

Life insurance segment grows 2%

Further, for the month of March 2024 as well, the growth rate was comparatively lower as growth in health was offset by slower growth in motor and a fall in the fire segment. New India Assurance has remained the leading player with a premium income of Rs 37,035 crore in FY24, a rise of 7.40 per cent over the last year.

PSU general insurers’ March 2024 numbers rose by 9.9 per cent, more than double the of 4.0 per cent in March 2023. However, the annual performance, although positive, was muted by nearly 130 bps compared to last year. On the other hand, the private sector general insurers reported a growth of 9.5 per cent for March 2024 as against 13.2 per cent in March 2023.

“The FY24 numbers have demonstrated robust growth which can be primarily attributed to group health and motor insurance (premiumisation of the market with SUV sales increasing their share in the PV segment,” said a CareEdge Ratings report.

Meanwhile, specialised insurers posted a drop of 28.9 per cent in March 2024 compared to a rise of 14.1 per cent in March 2023. Similarly, the FY24 numbers continued to reduce by 29.3 per cent vs. a growth of 5.1 per cent in FY23. This has been primarily because crop insurance premiums of Agriculture Insurance Company reduced by 32.1 per cent for FY24, as select public sector general insurers and a few private general insurers picked up a larger proportion of crop insurance premiums.

Standalone private health insurers (SAHI) continued their growth momentum as the March 2023 numbers topped the Rs 4,000 crore mark from Rs 3,000 crore in February 2024 and coming in higher by 25.9 per cent over March 2023 as they continue to gain share in retail health from PSU insurers and increasing their share of the group health pie. Further with IRDAI approving two SAHIs in F24, competition is expected to accelerate even further in FY25. Health insurance premiums continue to be the primary growth driver of the non-life insurance industry. This has increased the segment’s market share from 33.3 per cent for FY22 to 37.6 per cent for FY24. The health segment has grown by 20.2 per cent for FY24, which is lower than the growth of 23.2 per cent witnessed for FY23.

“The industry’s growth will continue to be driven by the health and motor insurance segments as they account for around 68 per cent of the premiums. Broadly speaking the first quarter of the financial year accounts for around 20 per cent of the sector’s premiums and this trend is likely to persist in FY25,” CareEdge Ratings said.





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Underwhelming performance



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Govt links wage hike for PSU insurance staff with performance


The government has asked the unions of the PSU general insurance (GI) industry to accept “performance linked future wage revision’’ before it approves the pending wage revision along with arrears since August 2017. There will be a total outgo of Rs 8,146 crore from all four companies and fresh capitalisation by the government for meeting wage revision expenses.

According to an official, in a meeting of the officials of Department of Financial Services (DFS), GIPSA, the coordinating agency of four PSU general insurers, GIC Re and recognised unions, a senior DFS official categorically said that Finance Minister Nirmala Sitharaman wanted an assurance from the unions for implementation of performance linked wage revision before approving the pending wage revision for the industry. Industry observers say the government has to provide capital to the three companies (United India, National Insurance and Oriental Insurance) for implementing their new wages.

With the 12 per cent hike along with five years of arrears, wage bill for National Insurance will be around Rs 2,177 crore, Rs 2,080 crore for New India Assurance (NIA), Rs 2,135 crore for Oriental Insurance and Rs 1752 crore for United India Insurance.

DFS officials informed the unions that wage revision could be released within five days if the union gives an assurance that they would allow smooth implementation of performance-based wage revision in the industry. GIPSA had called for an urgent meeting of unions after the Finance Minister refused to give her nod to the 12 per cent final wage revision proposal of the industry unless the unions agreed for the new revision method. However, in the meeting, the unions responded by reminding the earlier assurance of DFS Joint Secretary Sourabh Mishra and the GIPSA towards sharing the consultant report prepared by Ernst Young (E&Y).

The unions wanted the report of E&Y — hired by GIPSA to turn the PSU general insurers into agile as well as profitable — to study the consultant’s proposals, including performance linked future wage revision, before its implementation. The unions have further clarified that they were not against KPI (key performance indicator) being the sole criteria for assessing the performance and pay structure of PSU insurers in the future but these concepts need detailed and serious discussion, sources said.

Moreover, the unions had asked the DFS and GIPSA to clear the pending wage revision at par with Life Insurance Corporation (LIC) without any condition or linking it with “performance linked future wage revision’’ before Diwali and then to come out with a new proposal for wage revision with effect from 2022-23.

Observers point out that the condition of performance linked revision may not be accepted by the unions easily and will further delay the conclusion of ongoing wage negotiation for the industry. The ministry while finalising the wage revision had earlier informed the unions that the next wage revision will be based on the performance of each PSU general insurer and each individual within the company.

The unions had reservations in accepting it and wanted more details on the issue.

It is now almost over a month since the Finance Ministry had finally rejected the demands of unions for a wage revision on par with LIC and was expected to notify a 12 per cent hike for the industry soon though unions had not agreed with the proposals.

The government last year had approved a 16 per cent wage revision with arrears for the employees of IPO-bound LIC and had even finalised a hike of 15 per cent with arrears for the PSU banking industry in 2020.





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GST wing of CBIC conducts tax inspections against insurance companies



The Goods and Services Tax wing of the Central Board of Indirect Taxes and Customs (CBIC) has carried out tax searches and inspections against several insurance companies. The list of companies the tax sleuths have visited includes several of the major life and non-life insurers.


A government source said the tax searches were about cases where the insurance companies had taken input tax credit in excess of what they are entitled to. This is not the first time that the CBIC has launched a coordinated action against several companies in the sector.

Some years ago, the indirect tax department had investigated the non-life companies for alleged tax evasion in the motor insurance business. The combined dues had then amounted to over Rs 1,500 crore.


This time the quantum of the overdrawal of input tax credit is still being added up, but it is expected to be over Rs 3,000 crore for the entire industry. The combined demand by the department from the insurance arms of one of the financial sector entities is itself close to Rs 600 crore, it is understood.


Business Standard reached out via email and phone calls to several companies to elicit their reaction to the searches. None of them were willing to comment on the government action, which has been on since early this week.


A top source in the Insurance Regulatory and Development Authority of India confirmed the extent of action by the CBIC.

However, the source said the regulator had not been informed officially by the finance ministry. Some of the companies are in favour of collective action by roping in the General Insurance Council and the Life Insurance Council to offer a collective response to the GST wing of CBIC.


Interestingly, while some of the companies or their promoter companies are listed in the stock exchanges, none has so far apprised the shareholders of the action by the CBIC.


Over the past couple of years, the government has been taking a series of steps to ensure there are no leakages in the GST revenues. Both the direct and indirect tax departments have been pooling their information to ensure the tax dues are realised.

In August 2022, the gross GST revenue collected reached Rs 1.43 trillion, which is 28 per cent more year-on-year. For the past six months in a row, the monthly GST revenues have crossed the Rs 1.4 trillion mark.

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Delhi HC recently struck down powers of Banks Board Bureau; new body to select chiefs of PSU banks, insurance firms


The Appointments Committee of the Cabinet (ACC) has approved a government resolution for establishing the Financial Services Institutions Bureau (FSIB) in place of the Banks Board Bureau (BBB). The FSIB will now select the chiefs of public sector banks and insurance companies.

The selection process of top officials of public sector insurance companies was in limbo in the wake of the Delhi High Court decision to strike down the power of BBB to select directors and chiefs of PSU insurers.

The ACC has also approved the appointment of Bhanu Pratap Sharma, former Chairman, BBB, as initial Chairperson of FSlB for a term of two years from the date of notification of government resolution or until further orders, according to a note issued by the Department of Personnel & Training to the Department of Financial Services (DFS).

Other members of the FSIB are Animesh Chauhan, former Chairman and Managing Director, Oriental Bank of Commerce; Shailendra Bhandari, former MD & CEO of ING Vysya Bank and ICICI Asset Management Company; and Deepak Singhal, former ED, RBI in-charge of departments of corporate strategy and budget, corporate services and human
resource.

The new framework was proposed by the DFS. The Cabinet also approved the guidelines for selection of General Managers and Directors (GMDs) of non-life insurance companies.

“The Department (DFS) shall first carry out necessary modifications in the Nationalised Banks (Management and Miscellaneous Provisions) Scheme of 1970/1980 (as amended) with the approval of Finance Minister, and then notify the Government Resolution for establishing FSIB as a single entity for making recommendations for appointments of WTD (Whole-time Director) and NEC (Non-executive Chairmen) in PSBs, PSIs and FIs and Guidelines for selection of GMDs in non-life insurance firms modelled on the guidelines set aside, while substituting references to BBB with FSIB,” the note said.

While deciding another case involving a general manger of a PSU insurer, the Delhi High Court had struck down the BBB’s power to select directors of PSU general insurance companies and the government has already implemented the verdict by cancelling all the appointments of the then serving directors who were selected by the BBB.

Inderjeet Singh, General Manager, New India Assurance (NIA), had gone to Delhi HC on the issue of appointment of Satyajit Tripathy (who is currently CMD, United India Insurance) by the government on the basis of recommendation of the BBB.

In view of Delhi HC’s earlier decision on the BBB and Singh’s pending case in the same court, the Finance Ministry was unable to use the BBB’s platform to select any new CMDs for the PSU insurance companies which it has been doing since 2018.

Meanwhile, NIA, the country’s largest general insurer, has been functioning without a regular CMD for almost last 100 days after Atul Sahai retired from the post in February end. The CMD post at Agriculture Insurance Company also fell vacant. With the delay in starting the selection procedures, the aspirations of some of the senior officials, who are in the race for the top job, are getting thwarted as they are nearing their retirement.

The BBB was originally set up in 2016 to select the CEOs and Executive Directors of public sector banks. However, the government later entrusted BBB to select the chiefs of insurance companies. With the government now clearing the FSIB, the selection process of chiefs of insurance firms is expected to take place in the coming weeks.

EDot: Looking ahead

With the government now clearing the FSIB, the selection process of chiefs of insurance firms is expected to take place in the coming weeks.





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