Investors' high expectations raise risk for stocks of general insurers

Benefits of lower claims could get offset by subdued premium collection and fixed costs

General insurance firms have staged a sharp comeback on the bourses in recent weeks. ICICI Lombard General Insurance Company (ICICI Lombard) and New India Assurance Company (New India) have seen a 37-48 per cent surge in their share prices since March 23, outperforming the 17-per-cent rise in the Sensex during the same period.

Expectations of strong demand for health products amid the Covid-19 outbreak, and higher profitability — aided by lower claims — have driven up investor sentiment. 

However, investors may have to tone down profitability expectations, given the concerns over premium collections and costs.

Avinash Singh, analyst at SBICAP Securities, says: “Claims