Q1 numbers of insurers call for caution

Are insurers being pushed to a corner by Covid-19? It looks so, if one goes by the first quarter business performance of both life and non-life insurers.

Per the numbers released by the Insurance Regulatory and Development Authority of India (Irdai), the first year premium of life insurers declined 18.64 per cent in the first quarter of the current financial year ended June 30, 2020 compared with the same period last year. It stood at ₹49,335 crore up to end of June as against ₹60,637 crore in the same period last year.

Decline is seen for Life Insurance Corporation (LIC) of India as well as private players due to lockdown and transport restrictions.

The premium received by the 23 private life insurance companies declined by 19.17 per cent at ₹12,805 crore (₹15,842 crore). Of the 23 players, all except five, posted decline in premium ranging from 2 per cent to 52 per cent.

Implications

The implications are diverse. “I don’t go by overall premium figure but think individual new premium should be seen as a indicator,” RM Vishakha, Managing Director and CEO, IndiaFirst LIfe Insurance, told Business Line.

While the gross first year premium fell by 18.45 per cent, individual new business premium declined by only 8 per cent. “Given the general economic environment of slowdown, I am okay with it,” she said.

The decline in group business could some times be ‘misleading’ as it involves corporate and fund related components, say industry sources.

However, there is also a note of caution. “The Covid-19 situation is entirely unpredictable as of now. If claims increase phenomenally, there could be further stress on the insurers going forward,” said Head, Underwriting of a private insurer.

In the non-life, too, the gross direct premium under written up to June 2020, too, decreased by 4.24 per cent to ₹39,330 crore (₹41,072 crore). While all general insurers’ premium fell by 6 per cent to ₹35,668 crore, standalone health insurers, however, registered a 15.8 per cent growth in gross premium underwritten to ₹3,232 crore.

Pandemic risk pool

The growth in health insurance, however, could be offset by increase in claims. According to industry sources, Covid-19 related claims have already crossed about ₹350 crore and are expected to go up further. This calls for greater caution. In timely move, the insurance regulator has mooted a Pandemic Risk Pool for the country to help insurers deal with losses if present situation continues further.

The Irdai has formed a working group to explore the feasibility of a risk pool and expected to frame a policy in the coming months.

Under these circumstances, short-term business strategies, increased recourse to digital means and rationalisation of costs could be of help for insurers. There is also a need to address reinsurance concerns. It is learnt that insurers have been facing problems due to reluctance on the part of the re-insurers.