The IRDAI circular expands the current “use and file” procedure for life insurance products, broadening its scope and allowing for more flexibility in the industry.
Recently, the monthly insurance data has been encouraging, both in case of general insurance and life insurance. Under general insurance, Stand Alone Health Insurance (SAHI) has outperformed private multi-line players and the overall industry.
In May 2023, the gross written premium (GWP) for the industry grew 18% YoY led by the health (up 21% YoY) and motor (up 23% YoY) segments.
The crop segment saw a healthy premium growth of 34.5% YoY. The Fire segment and Commercial lines relatively underperformed with a muted YoY growth of 5.9% and 9.4%, respectively.
SAHIs/private multi-line players reported GWP growth of 23%/21% YoY. On the other hand, PSU players reported a 13% YoY growth.
Among key players, ICICIGI grew 21% YoY in May’23 (higher than the industry growth), whereas Star Health reported a GWP growth of 16% YoY.Health business is up 21% YoY, led by higher growth of 18%/32% in both retail/Group health segments.
In Apr’23, private players reported a 25% YoY growth in health premiums, higher than the overall health industry growth.
The overseas health segment also grew at a decent pace of 24% YoY. SAHIs reported a 24% YoY growth in Health GWP.
PSU multi-line players posted a growth of 9%/25% in the retail health and group health segments, respectively. The motor segment clocked a healthy growth of 23%
The motor business grew 23% YoY, primarily driven by the motor OD segment (up 27% YoY).
PSU players outperformed private multi-line players in the motor OD segment but underperformed in the motor TP segment.
The life insurance industry’s growth moderated in Apr’23 and May’23 after delivering strong growth in Mar’23.
This was on account of large buying by the customers in Mar’23 just before the budgetary changes were implemented. Individual WRP for private players grew 10.4% YoY in May’23.
The same for the industry rose 5.7% YoY in May’23 (v/s a decline of 3.5% YoY in Apr’23; reported a three-year CAGR of 8.2%).
On an individual WRP basis, the market share for private players moderated to ~63% in May’23. LIC’s market share improved marginally to 37%. Total unweighted premium increased 58.1% YoY (up 31.8% in Apr-May’23).
The seasonality of the insurance business is declining, indicating a reduction in the usage of 80c benefits for insurance purchases.
Also, the range of products that qualify for 80c benefits has expanded over time.
Hence, even in a no-deduction regime, demand for insurance is expected to remain strong. As demand remains robust, growth momentum is expected to sustain in FY24.
SBI Life: Target Rs 1,500
SBI Life is the market leader with a 15% share on an individual WRP basis among private players. In May, its premium grew by 8.5% YoY (industry growth by 5.7% YoY).
All distribution channels continued to see a rise in productivity, resulting in a better cost ratio. Since the penetration of insurance among SBI customers is currently low, there is significant potential for growth opportunities remain large.
We estimate a 20% CAGR in APE over FY23-25 & VNB margin to remain at 30% in FY25. RoEV is expected to hover at ~22-23%.
ICICI Lombard: Target Rs 1,400
Going ahead, growth in the motor segment is likely to be back-ended with the company waiting for the rationalization of pricing in the OD segment.
In the health segment, the benefits of price hikes and improving the efficiency of the agency channel should translate into improved profitability.
Synergy’s benefits from the Bharti AXA merger should aid in improving the combined ratio and RoE over the next couple of years.
(The author is Head – Retail Research, Motilal Oswal Financial Services)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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