The health insurance sector has overtaken motor insurance to become the largest segment within general insurance following the post-Covid surge, currently representing 41% of total industry premiums, while motor insurance continues to lose market share.
During the period from April to July, the general insurance sector reported a gross direct premium income (GDPI) amounting to Rs 1.01 lakh crore. Health insurance represented 41% of this total, whereas motor insurance contributed 29%. It is noteworthy that motor insurance was the predominant segment in the general insurance market until the fiscal year 2022, where it constituted 34% of the Rs 1.99 lakh crore GDPI, in contrast to health insurance’s 32%.
Mayank Gupta, the vice president of auto insurance at Acko General Insurance, attributes this stagnation to several factors, including the absence of revisions in third-party (TP) premiums, a decline in new car sales, and the base effect resulting from elevated sales figures observed during the post-pandemic period.
Gupta stated that the lack of significant increases in third-party insurance premiums since 2022 has restricted the overall growth of premiums. As third-party premiums typically represent a considerable share of motor insurance revenue, their stability has hindered overall growth.
Motor insurance is categorized into own damage (OD) coverage, which addresses repairs to the insured vehicle, and third-party (TP) coverage, which compensates for damages or injuries inflicted on others. Insurers determine OD premiums based on the vehicle’s value and associated risk factors, whereas TP rates are governed by the Insurance Regulatory and Development Authority of India (Irdai). The lack of revisions to TP rates, combined with substantial claim payouts, has prompted numerous insurers to reduce their engagement in the motor insurance sector.
For example, GoDigit, which commands a 6% share of the motor insurance market, experienced a decline in its TP premium share, decreasing from 36% of ₹2,178 crore in gross written premium during Q1FY24 to 29% of ₹2,660 crore in Q1FY25.
Kamesh Goyal, chairman of GoDigit General Insurance, stated during the Q1 earnings call that the motor TP business has faced a significant challenge over the past three years, characterized by minimal price increases. He noted that there is consistently a slight inflation in TP claims.
Sanjeev Mantri, the Managing Director and Chief Executive Officer of ICICI Lombard General Insurance, expressed concern regarding the ongoing pressure on the motor combined ratio, a critical measure of profitability in the industry, due to the absence of increases in third-party (TP) pricing. During the Q1FY25 earnings call, he remarked, “Although there has been some progress in the overall combined ratio, the motor combined ratio continues to face challenges without a TP rate adjustment.”
Regarding the growth in health insurance, Amit Chhabra, Chief Business Officer of General Insurance at Policybazaar, linked the rise in premiums to heightened awareness, healthcare inflation, and the consequent escalation in health insurance costs. He stated, “Health insurance premiums are experiencing an annual increase of 10-15% due to medical inflation, in contrast to motor insurance.”
According to Jefferies’ most recent insurance report, major private insurers are expected to gain from a prolonged upcycle in motor vehicle sales, which is being driven by a transition towards premium, high-value vehicles. The report highlighted, “Two-wheeler sales are rebounding after an extended period of decline, and certain segments of commercial vehicles (high tonnage) are showing signs of improvement. A potential increase in new passenger vehicle sales or an adjustment in motor TP pricing, the last of which occurred in March 2019, could serve as a positive catalyst.”
