Mobilization of premiums: PSU general insurers lose market share in the June quarter

Public sector general insurers, which once monopolized the sector, focusing more on profits, they lost market share in gross written premiums to the aggressive private sector during the quarter ended June 30, 2022.

While the market share of private companies increased to 51.82% in June 2022 from 47.63% a year ago, general insurers PSU lost market share from 42.23% to 37.85% . Gross premium collection from general insurers showed a growth of 23% to Rs 54,492 crore for the quarter ended June 30, 2022.

According to data available from the General Insurance Council, private sector companies recorded higher growth of 33.8% to Rs 28,235 crore in premium collection for the June quarter. However, four public sector general insurers recorded only 10.25% growth in premium collection to Rs 20,626 crore in the last 3 months.

Among private sector companies, ICICI Lombard General Insurance retained the top spot by mobilizing a premium of Rs 5,370 crore, up 43.86% growth. Bajaj Allianz raised Rs 3,100 crore during the quarter, a growth of 25.43%.

New India Assurance, India’s largest general insurer but now operating without a chairman or managing director, reported an 8.13% increase in premium collection to Rs 9,550 crore in the June quarter, according to Council data. Health insurance companies mobilized Rs 5,263 crore representing a growth rate of 28.63% in the quarter.

According to insurance sources, the government has asked PSU general insurers to focus on profitability rather than opting for higher turnover in deficit areas.

The Ministry of Finance has asked central public sector enterprises (CPSEs) and administrations to relax the requirement of a minimum solvency ratio of 1.5 of liabilities as one of the eligibility criteria for participation of public sector insurance companies in the bidding process.

According to a ministry memorandum to various departments and insurance companies, the stipulation of a high solvency ratio obliges three of the four public sector general insurance companies – National Insurance Company Ltd (NIC), Oriental Insurance Company Ltd ( OIC) and United India Insurance Company Ltd (UII) — ineligible to participate in the tender process despite their “extensive experience and skills in risk management”.

The ministry’s rating follows intense competition in the sector and the declining performance of three PSU insurers. Only New India Assurance Company Ltd reported a solvency ratio above 1.5 among the four PSU insurers. Ministries and CPSEs, which constitute an important market for insurance companies, award insurance contracts by tender.

The solvency ratio, which is net income and depreciation divided by liabilities, is the financial capacity of an insurance company to meet its obligations. A high ratio means the business is financially sound and has enough capital to pay all valid claims. In accordance with IRDAI’s mandate, the minimum solvency ratio that insurance companies must maintain is 1.5 to reduce risk. In terms of solvency margin, the required value is 150%.

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