General insurance companies see brisk rise in investments: Irdai data

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Backed by a healthy growth in sectors like motor and health insurance, investments of non-life insurance companies rose by around 128 per cent in the past five years. A majority of the investments got channelised into government securities.

According to data from Insurance Regulatory and Development Authority of India (Irdai), total investments of non-life insurance companies until March-end 2016 stood at around Rs 1,88,126 crore, over Rs 82,520 crore in the corresponding month in 2011.

Further, in 2017, the premium collected on account of crop insurance scheme is likely to add to the investment pool of non-life insurers. According to informal estimates, the total premium collected from the first year of operation of the Prime Minister Fasal Bima Yojna (PMFBY), launched in February 2016, is expected to be around Rs 22,000 crore.

According to Sanjay Datta, chief underwriting & claims, ICICI Lombard General Insurance, much of the growth in the non-life insurance sector has been driven by retail participation, particularly motor and health insurance. At present, retail accounts for around 65 per cent of the total premium collected by the ICICI Lombard. Two to three years back, the share of retail in this respect stood at around 50 per cent.

"Over the last two to three years, we have seen a 15-16 per cent growth in premium, driven by health and motor insurance," said Datta.

The motor insurance business continued to be the largest non-life insurance segment with a share of 43.89 per cent during 2015-16, as against 44.14 per cent in the year-ago period. The segment reported a growth of around 13.17 per cent during 2015-16, as against10.52 per cent in the preceding year.

However, health insurance has emerged as one of the highest growing segments in the general insurance sector. The premium collection in health segment stood at Rs 27,457 crore during 2015-16, as against Rs 22,636 crore last year, thereby, clocking a growth of around 21.30 per cent on a year-on-year basis.

Further, following the issue of IPOs by several public sector general insurance companies, the retail penetration of non-life insurance is likely to increase due to heightened competition among players, who are looking to grab a larger share off the market pie.

"After the successful IPO offers, general insurance companies in the fray would secure capital, which would facilitate higher growth. Currently, due to solvency margin restrictions, growth is measured and controlled. This would change as the insurers would be free to expand and this might result in higher discounts, as they (general insurance firms) would try and increase their market share. As of now, there is no scope for discounts but the picture would change once the capital flows in," said K Sanath Kumar, Chairman-cum-Managing Director, National Insurance Company.

Much of the investment brought about by growth in the general insurance sector has flown into government debt over the last five years.

General insurance companies are mandated to invest around 30 per cent of their premium in government securities. However, most insurance companies have been investing more than the required amount in government securities.

Until March-end in 2016, nearly 27 per cent of investments of general insurance companies went into central government securities, while around 12 per cent went for state government and other approved securities.

At National Insurance, nearly 41 per cent of investments are into government securities, according to a senior official working with the firm.

The non-life insurance industry underwrote a total direct premium of Rs 96,379 crore during 2015-16, over year last year's collection of around Rs 84,686 crore. This means that the sector registered a growth rate of 13.81 per cent on a year-on-year basis. However, the overall penetration of general insurance companies continues to be low in India. As of 2015, the penetration of non-life insurance stood at around 0.72 per cent in India, as against the life insurance sector's penetration levels of 2.72 per cent.