Underwriting losses of the general insurance industry were up 6.27 per cent to Rs 23,720 crore in FY20, from Rs 22,320 crore in FY19, according to data released by Insurance Regulatory and Development Authority’s (Irdai) in its Annual Report for 2019-20.
While state-owned insurers' underwriting losses rose 1.12 per cent to Rs 18,741 crore, private insurers saw their underwriting losses rise more than 26 per cent to Rs 3,647 crore. Similarly, standalone health insurers reported a 14 per cent rise in underwriting losses in FY20.
This is because net incurred claims of general and health insurers totaled to Rs 1.08 trillion, up 7.26 per cent from 1.01 trillion in FY19. If the premiums collected is not on in proportion to the claims paid, insurers suffer underwriting losses. If claims paid are less than premiums collected, insurers earn underwriting profits.
Consequently, the general insurance industry, in FY20, suffered net losses to the tune of Rs 1,494 crore as against Rs 683 crore in FY19, mainly due to the poor performance of the state - owned insurers. The public sector companies reported a loss of Rs 5,701 crore against a loss of Rs 3,288 crore.
On the contrary, the private sector general insurers reported a net profit of Rs 4,037 crore against Rs 3,584 crore in FY19 and specialized insurers have reported profit after tax of Rs 501 crore against Rs 685 crore whereas the standalone health insurers reported loss of Rs 331 crore against a loss of Rs298 crore.
Experts are not sure what will be the impact of Covid on underwriting losses in the current financial year (FY21) because although health claims due to covid has moved up significantly, other claims were relatively lower due to the strict lockdown imposed by the authorities.
Life insurers, on the other hand, reported a net profit of Rs 7,728 crore in FY20 compared to Rs 8,436 crore in FY19. Out of the 24 life insurers in operation during 2019- 20, 17 companies reported profits. The total profit reported by LIC during the year under consideration was Rs 2,713 crore and private insurers reported a net profit of Rs 5,016 crore.
Investment income of life insurers was down almost 18 per cent in FY20 to Rs 2.33 trillion, of which LIC’s investment income was Rs 2.37 trillion. Private insurers reported a negative investment income of Rs 3,105.97 crore due to negative movement in the fair value of unit linked assets.