The health insurance segment, which surpassed motor insurance as the largest segment in general insurance in the post-Covid boom, now accounts for 41% of industry premiums, with motor insurance continuing to cede ground.
In the April-July period, the general insurance industry recorded a gross direct premium income (GDPI) of Rs 1.01 lakh crore. Health insurance accounted for 41% of these premiums, compared with motor insurance’s 29% share. For context, motor insurance was the largest segment in the general insurance industry until FY22. The segment accounted for 34% of Rs 1.99 lakh crore of GDPI in FY22 while health insurance held 32%.
Motor insurance premiums have stagnated as a percentage of industry GDPI over the past three years while health insurance has consistently grown year-on-year.
Mayank Gupta, vice president, auto insurance, Acko General Insurance, attributes this stagnation to factors such as the lack of third-party (TP) premium revisions, slowdown in new car sales and the base effect of high sales during the post-pandemic period.
“The constant or no increase in third-party insurance premiums since 2022 has limited the overall premium growth. Third party premiums often form a substantial portion of motor insurance revenue, and their stability has constrained growth,” Gupta said.
Motor insurance is split into own damage (OD) coverage for vehicle repairs and TP coverage for third-party damages or injuries. While OD premiums are set by insurers based on the vehicle’s value and risk factors, TP tariffs are regulated by the Irdai. The absence of TP rate revisions, coupled with high claim payouts, has also led many insurers to slow down on motor insurance.
For instance, GoDigit, which holds a 6% market share in motor insurance, saw its TP premium share drop from 36% of ₹2,178-crore gross written premium in Q1FY24 to 29% of ₹2,660 crore in Q1FY25.
“The challenge we have seen in the motor TP business in the last three years is that there has hardly been any price increase. There is always a bit of inflation in TP claims,” Kamesh Goyal, chairman, GoDigit General Insurance, said in the Q1 earnings call.
Sanjeev Mantri, MD and CEO of ICICI Lombard General Insurance, echoed this concern, saying that the lack of TP price hikes continues to put pressure on the industry’s motor combined ratio ― a key profitability measure. “While there’s been some improvement in the overall combined ratio, the motor combined ratio remains under strain without a TP rate hike,” Mantri said in the Q1FY25 earnings call.
On growth in health insurance, Amit Chhabra, chief business officer, general insurance, Policybazaar, attributed the premium growth to rising awareness, healthcare inflation and the resulting increase in health insurance premiums. “Health insurance premiums are rising by 10-15% annually due to medical inflation, unlike motor insurance.”
Jefferies’ latest insurance report has said large private insurers are poised to benefit from a multi-year upcycle in motor vehicle sales, driven by a shift towards premium, high-value vehicles. “2W sales are recovering after a long slowdown and pockets of CV (high tonnage) are seeing improvement. Potential pick-up in new PV sales or hike in motor TP pricing (last one in March 2019) can be a positive catalyst,” the report noted.
