102 First FLoor, C&B Square, Sangam Complex, Chakala Andheri (E), 400059
102 First FLoor, C&B Square, Sangam Complex, Chakala Andheri (E), 400059
Lower health insurance payouts post Covid, increase in prices of group insurance and easing of solvency requirements for crop insurance will support growth for general insurance companies in the next fiscal, rating agency Care said.
The rating agency expects gross direct premium of general insurance companies to grow by 12% to 15% in the medium term with private insurers continuing to outperform government owned insurers.
"Improvement in loss ratio along with rising yield on investment will support profitability. Relaxed guidelines for raising subordinate debt and equity along with lower solvency requirements in crop insurance will provide additional growth capital," Care said.
The rating agency expects loss ratio to come down to 85% in fiscal ended March 2024 from a peak of 92% at the end of fiscal 2022. Loss ratio is used in the insurance industry, representing the ratio of losses to premiums earned. Losses in loss ratios include paid insurance claims and adjustment expenses.
Care said that with claims pay out stabilising from a post pandemic peak and increase in pricing im group health plans will keep loss ratios down. Though motor insurance will remain under pressure due to competition.
Rising interest rates after the RBI rate hikes will also support yield on debt investments of insurance companies. Relaxed guidelines on investments will also help general insurance companies.
However, private sector insurance companies will continue to do better than public sector companies due to their better solvency ratio, profitability and capital positions. Public sector general insurance companies will continue to be pressured due to their dependence on government for capital.
Care expects private sector general insurance companies to report a 13% to 14% return on equity in the medium term even as public sector companies' profit remain muted.
Overall low insurance penetration in India, easier norms like use and file, lesser regulatory filings and relaxation on distributor tie ups will support growth of general insurance companies even as an uncertain geopolitical environment, high inflation and rising cost of capital pose risks to the sector.
