Sitharaman's sops likely to spur motor insurance companies' growth

The motor insurance segment of non-life insurers, which reported the slowest growth in the last five quarters because of negative sales trend in automobiles, may see a revival after finance minister Nirmala Sitharaman’s sops on Friday.

The Finance Minister, among other measures for the auto sector, had announced revision of one-time registration fees and bettering infrastructure.  She also said a vehicle acquired from now to March 2020 will attract an additional 15 per cent depreciation rate, thereby taking the entire depreciation rate to 30 per cent. 

The enhanced depreciation is expected to motivate vehicle makers. “This positive measure should lead to tax coming down for client businesses, implying higher profitability due to lower effective cost on new vehicles. 

The measures have no direct impact on premium. However, they should augment sale of new vehicle, thus improving opportunity for insurance companies,” said Rakesh Jain, executive director and chief executive officer (ED & CEO), Reliance General Insurance.

Slowdown in sale of new vehicles has impacted the growth in premiums for the motor insurance segment.

Premiums collected from the motor insurance segment contribute close to 38 per cent of the overall collection from various segments for the non-life industry. 

In the June quarter, growth in the segment was around 4 per cent, with premium collection at Rs 15,724 crore against Rs 15,074 crore in the same period of FY19. This was the lowest growth in the last five quarters, starting from Q1FY19.

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