The well-known story of recent growth in financial services is of mutual funds: a trebling of assets under management in the last five years. There’s a lesser-known story of growth in this industry playing out that is equally noteworthy: non-life insurance, which has doubled its gross premiums collected in the last five years, and is now readying to see its first stock market listings in the form of GIC and ICICI Lombard General Insurance.
In the growth story of non-life insurance, there are parallels with the mutual fund industry. One, as with mutual funds, the recent growth has been led by segments servicing individuals (as opposed to institutions). Motor, health and personal accident—all retail segments—are three of the four biggest segments in non-life insurance, and they have grown the most in the last five years.
Two, a lot of mutual fund growth came from value (rising share prices) and not volume (new investors). Similarly, in non-life insurance, though gross premiums have increased by 118% in the last five years, the number of new policies issued has grown only 42%. In other words, the increase in unit premiums in health and motor (especially third-party) is driving revenues.
Three, private sector insurers continue to advance on the four public sector players, who enjoyed a monopoly till the opening of the sector in 2000. Between 2011-12 and 2015-16, growth in new policies issued by private players is nearly twice that of public sector players.
Private players also score on profitability, with the leading ones having a claims ratio that is lower than the big public sector players.