Near-term pricing, growth worries for general insurance companies

The general Insurance sector is facing challenges due to aggressive discounting in property and casualty insurance, prospects of a flat motor third party (TP) tariff outlook, and low February numbers.

 

In February 2025, the gross direct premium income (GDPI) for general insurers dropped 2.8 per cent year-on-year (Y-o-Y). Both public (down 4.3 per cent Y-o-Y) and private (down 5.2 per cent Y-o-Y) multi-line insurers suffered drops in GDPI. Among listed players, ICICI Lombard General Insurance or ICICI Lombard (down 0.7 per cent Y-o-Y) and Go Digit General Insurance (down 7.3 per cent Y-o-Y) saw contraction.

 

Insurers have underpriced high-risk coverage to gain market share. This has adversely impacted the claim ratios of reinsurers, and there have been premium increases since January 2025. Higher rates of natural catastrophic (NatCat) events may lead to further hardening of reinsurance rates, which may reflect in April 2025 renewals. Fire GWP may eventually see 60 per cent growth, with insurers raising prices by up to 80 per cent.

 

Bajaj Allianz General Insurance saw GDPI down 5.9 per cent Y-o-Y and market share decreased three basis points Y-o-Y to 7.1 per cent in February 2025. ICICI Lombard’s market share has increased 19 basis points Y-o-Y to 8.9 per cent. Go Digit saw a GDPI reduction of 7.3 per cent Y-o-Y on a high base (32.5 per cent Y-o-Y growth in Feb-24) and market share was flat Y-o-Y at 2.8 per cent.

 

In motor, data of M9FY25 shows the undiscounted net claims ratio moved up from 82 per cent for Motor TP in FY23 and FY24 to 86 per cent in M9FY25 while the discounted net claims ratio is around 66 per cent for M9FY25. The commission payout is high, given a product mandated by law. 

 

General insurers are braced for another year of no tariff hikes in Motor TP. The regulator has granted a minimal-to-no tariff hike across most vehicle categories over FY19-25. Passenger cars and light commercial vehicles (LCVs) in urban areas are profitable for Motor TP, whereas long-haul highway heavy commercial vehicles are a high-loss category. Insurers pay hefty commissions to source profitable vehicles while avoiding the loss-making class underwritten by public sector insurers. Without Motor TP tariff hike, growth and profitability for multiline general insurers are challenging.

 

Commercial insurance accounted for 10 per cent of general insurance premiums. Fire insurance GWP (gross written premiums) had 17 per cent over FY20-24 due to infrastructure development. But in YTDFY25 (till January 2025), GWP declined 6 per cent Y-o-Y due to aggressive discounting. Rising NATCAT claims have also led to solvency pressures for reinsurers.

 

The fire segment loss ratio was 78.3 per cent in FY24, up substantially from 58 per cent in FY23. ICICI Lombard is the largest private insurer in fire, with a 13.4 per cent market share in YTDFY25. In M9FY25, prudent NatCaT selection resulted in only a 50-60 basis point NATCAT impact for Bajaj Allianz General Insurance (Bagic) and ICICI Lombard versus 90-100 basis points in M9FY24. Hikes in insurance rates, in January 2025, should, however, drive strong growth in fire insurance GWP and improve profitability.

 

GIC Re, the only Indian reinsurer (51 per cent market share of gross reinsurance premiums), saw a rise in claims ratio to 89 per cent in FY24 (vs 80 per cent in FY23). Higher reinsurance costs to maintain solvency will lead to price hikes which will be passed onto policyholders.

 

Bajaj Allianz General Insurance’s (Bagic) digital capabilities are a key driver. Bagic has a rapid claims settlement platform, a digital chatbot for property insurance, and the Udyam Seva Portal to cater to corporate and MSME clients. It leverages drone inspections to expedite assessments. Bagic fire loss ratios improved to 60.3 per cent in M9FY25 (62.9 per cent in M9FY24.

 

Go Digit has the top 80 corporates as clients and is trying to increase its presence in other categories. Go Digit’s marine insurance portal has seen good traction. ICICI Lombard has been prudent and raised prices for fire insurance and anticipates further price hikes.