Insurance report by Kotak Institutional Equities – Insurance, Moderate growth, high competition
Moderate growth, high competition
The non-life insurance industry growth was moderate at 15% in August 2023. Core retail segments such as motor and health continue to report strong growth of 19-20%, with continued competitive intensity in motor OD. Commercial lines reported muted growth. Group health remains the saving grace, delivering growth and flexibility on EoM. ICICI Lombard continues to trail motor industry growth. Star Health has lost retail market share although is better sequentially.
Moderate growth for industry
The non-life insurance industry reported 15% premium growth (ex-crop) driven by strong 20% growth in retail health and moderate 14-16% growth in group health and motor segments. SAHI players continued to post strong 25%/33% growth in retail/group segments. Private GI players maintained 54% market share with moderate 17% growth (ex-crop). Motor OD growth has been strong at 19% yoy in August 2023 and 21% in 5MFY24. Increase in ASPs of vehicles has supported motor OD growth, while flat TP tariffs resulted in muted TP growth (14% in August 2023 and 17% in 5MFY24).
ICICI Lombard trails in motor OD; group health remains driver
ICICI Lombard’s ex-crop premium increased to 18% in August from 15% in July 2023. The improvement in overall premium growth was driven by a 31% increase in group health. ICICI Lombard’s market share in the retail health segment (premium up 19% yoy) remains stable at 2.9%.
Motor OD growth has picked up to 17% (from 11-15% in past two months), still lower than the industry growth of 19%. New-age players such as Digit and Acko continue to deliver 34-54% growth in August 2023 (despite high expense ratios of 35-58% in 1QFY24); as such, competitive intensity does not seem to have receded despite implementation of EoM guidelines. Other established players such as Bajaj Allianz, HDFC Ergo and Chola MS have been selective, entering and exiting the market based on the competitive pressures. Growth in motor TP for ICICI Lombard was 13% as compared to 14% for the industry.
Strong group health growth—31% in August and 37% in 5MFY24—and the segment’s low costs will give ICICI Lombard some wiggle room on managing the EoM ratio. Growth in fire, marine and liability was muted at 3-8% in 5MFY24, likely reeling under some pressure from the removal of IIB tariffs.
Star Health loses market share in retail health
Following sluggish growth of 16% in July 2023, Star Health’s retail health growth inched up to 18% in August. Other SAHI players remain aggressive—Care grew 56% and Niva Bupa 25% yoy. After running down its corporate portfolio in FY2023, Star Has reported 37% growth in group health in August 2023 and 31% in 5MFY24. Group health includes bancassurance credit-linked products as well as employer-employee insurance; as such, yoy segmental growth may not be accurate.
4 Bajaj Allianz General reported strong 22% yoy growth in premium (ex-crop) driven by 42% growth in group health, similar to ICICI Lombard. Bajaj has fared better in the motor OD segment, reporting 26% yoy growth in August 2023.
4 Chola MS premium (ex-crop) growth declined to 16% in August compared to 24% for 5MFY24. Slowdown in the motor segment (17% in August versus 26% in 5MFY24) led to decline in growth.
4 HDFC Ergo continued to report muted 6% growth (ex-crop) in August 2023; 8% in 5MFY24. Drag was primarily in the motor segment, likely due to high pricing pressure from new-age players.
4 Go Digit continues to scale its motor (up 52% yoy in August 2023) and retail health (up 31%) businesses. It now has 6.5% and 1.0% market share in motor and health segments, respectively.
4 SBI General has reported strong 29% yoy growth (ex-crop) in August 2023 driven by strong pickup in motor insurance (up 35% in August versus decline of 11% in 5MFY24).