PSU non-life insurers expect sub-10% growth in 2009-10

With the Reserve Bank of India (RBI) lowering the growth estimate for the economy to 6 per cent, non-life insurance companies also expect the industry to grow at sub-10 per cent in the current financial year.

The average growth of the new business premium income of general insurers had been around 9 per cent in 2008-09 due to the global turmoil and detariffing.

Of these, up to February 2009, public insurers grew at 6 per cent, while private firms managed a growth rate of 12 per cent.

Insurance companies finalise their targets at the beginning of the financial year itself. Usually, the targets are set on the basis of the growth rates achieved in the previous financial year in each segment – motor, health and fire & engineering.

In 2008-09, the health insurance sector grew at 25-30 per cent, while motor grew at 30 per cent. At the same time, fire & engineering went up by 40 per cent.

But the four public sector general insurance companies now expect the growth rate to be at sub-10 per cent, at about 7-8 per cent, in 2009-10.

Officials point out that, based on economic conditions, the growth is in line with the GDP rate.

“Insurance in the last thing one would buy in a downturn. Companies have scaled down their expansion plans and have cut down expenditure to the maximum extent possible. This has affected fire, engineering and health insurance segments,” said National India Insurance Chairman and Managing Director V Ramasaamy.

In fact, insurers expect the first half to be flat.

At present, insurers give around 80-90 per cent discount to beat competition. But they also feel that prices have almost stabilised, especially after the April 2009 reinsurance treaty renewals.

“Prices have stabilised to some extent as reinsurers have hardened rates. The premium collection will go up with the economy picking up in the third quarter of the financial year,” said Oriental Insurance Company Chairman and Managing Director M Ramadoss.

During the first eleven months of the last financial year, New India Insurance had grown at around 5 per cent, collecting a total premium of Rs 4,982 crore. National Insurance grew at over 6 per cent to Rs 3,867 crore.

United Insurance expanded its premium collection by 13 per cent to Rs 3,867 crore, while Oriental saw a growth rate of nearly 2 per cent after mopping up Rs 3,564 crore till February 2009.