Will India’s motor insurance decline

Will India’s motor insurance decline remain in the rearview mirror?

INDIA

The motor insurance segment, which had witnessed a decline in FY2020, is on the road to recovery in FY2021 with the private sector leading the charge due to some increase in motor vehicle sales, according to a report by research and analytics firm CARE Ratings.

Gross written premiums are expected to grow by 6%-7% by the end of India’s FY2021 in March next year.

The report said that motor insurance premiums business declined by 1.6% in 2020, a muted estimate as insurers accounted for renewals.

“In the earlier part of the pandemic, motor insurance premiums were struggling primarily as the new auto sales had suffered. In the recent months of FY2021, although the cumulative motor insurance premiums have reverted to growth, the cumulative August 2021 numbers continue to be lower than the pre-pandemic cumulative August 2019 numbers,” CARE Ratings said.

Private insurers

The growth trajectory experience in 2021 was mostly attributed to private insurers. In Motor TP (third-party insurance), public sector companies have turned from a majority share to slightly over 38% share in YTD August FY2021. This downtrend is particularly important as the motor TP segment has emerged as the larger segment driving the overall motor insurance growth.

Meanwhile, public motor OD (owndamage insurance) market share in August 2021 was 24.3% versus the 27.8% from last year. Private motor OD share in August was 75.7% versus 72.2% last year.

Uncertain

Growth drivers for the motor insurance industry is mostly led by rising demand for personal vehicle space that may lead to a shift in vehicle ownership patterns as well as strong demographic partnership. Additionally, digital issuance and online channels are expected to witness continued growth, the share of web aggregators within digital insurance has been constantly increasing as well.

Long term, the motor insurance industry will bank on the higher sales in automobiles and crackdowns on uninsured vehicles on the road.

“However, given that no increase in the motor TP premium has been announced, the sector is expected to witness pressure on near-term profitability. Furthermore, lower auto sales, high lapse-ratio (especially in the two-wheeler segment), any unfavorable changes in macro-economic factors such as third covid wave, and uncertainties in the regulatory landscape could be characterised as key challenges to the industry growth,” CARE Ratings said.

Motor insurance premiums business declined by 1.6% in 2020

Australia’s 2022 nat cat claim to reach whopping $770m: IAG

AUSTRALIA

The Insurance Australia Group Limited (IAG) has increased its expectation for FY2022 net natural perils claim costs to A$1.045b ($770m) compared to the previous assumption of A$765m ($568m), following the South Australian hail and Victorian wind event, and other events that impacted the second half of October.

“Net natural perils claim costs for the first four months have exceeded IAG’s previous assumptions by approximately A$280m. The revised FY2022 expectation also includes approximately A$510m for perils events for the remainder of the financial year,” IAG said.

IAG previously advised that they will raise the natural perils allowance significantly from 2021 to 2022, however the insurer said that claims experience year-to-date has been seasonally unexpected and has exceeded the assumptions underpinning the increase.

The A$280m increase in net natural perils claim costs equates to approximately 360 basis points at the reported insurance margin level. As a result, IAG has lowered its FY2022 reported insurance margin guidance range from 13.5 - 15.5% to 10.0 - 12.0%. Other assumptions remain unchanged, with inherent uncertainty in the revised net natural perils claim costs expectation.

IAG estimates that the A$270m (post-quota share) deductible attached to the FY22 aggregate cover has been eroded by A$209m as a result of recent weather events. Total protection available under the aggregate cover amounts to A$236m, post-quota share. After allowing for quota share arrangements, the combination of all catastrophe covers on 1 November results in IAG having a maximum event retention of A$95m.

Net natural perils claim costs exceeded IAG’s previous assumptions by approximately A$280m