Covid-19 pandemic seems to have hit the general insurance industry’s performance. With a record underwriting loss of Rs 28,500 crore in FY 2021-22, the Rs 2.23 lakh crore industry with 31 players has been pushed into red, leading to a hike in premium in many segments.
The loss occurred despite insurers reporting a higher investment income during the year. The industry reported underwriting losses of around Rs 19,400 crore in the previous year. “The high underwriting loss has led to a hike in premium by 5-10 per cent in many segments, especially health in the last six months,” said an insurance official.
According to data available from insurers, in FY 2021-22, a total of almost 18 lakh Covid claims were settled for an amount of Rs 16,190 crore, almost double of what was paid in terms of number of claims and amount in FY 2020-21. Almost 1,17,000 claims amounting to Rs 1,163 crore were repudiated or still pending for payment by the general insurance companies during FY 2021-22 and over 2,15,000 claims amounting to Rs 1,500 crore have been rejected or pending with general insurers in the last two years. “Many insurers burnt their fingers while settling Covid claims,” said an official.
Saddled with the huge overall losses of three PSU general insurers — Oriental Insurance (OIC), National Insurance Company (OIC) and United India Insurance (UII) — the segment has slipped into net losses of Rs 2,842 crore in FY 2021-22 as against a net profitability of Rs 3,869 crore during FY 2020-21. With a net profit of Rs 3,869 core, the industry had returned to black in 2020-21 after having registered net losses of Rs 1,402 crore in 2019-20.
Underwriting is the process insurers use to determine the risks of insuring a business, health of a person or venture. The insurance company determines whether a firm poses an acceptable risk and calculates a fair price for your coverage.
The industry has suffered operating losses of Rs 1,148 crore in FY 2021-22 as against an operating profit of Rs 6,616 crore in FY 2020-21. The segment had a total investment income of Rs 32,286 crore, up 11 per cent, in FY 2021-22.
Excluding Bajaj Allianz General Insurance, Care Health Insurance and state owned ECGC, the profitability of the rest of insurers for the industry can be attributed to their investment income and not pure underwriting in 2021-22. On the other hand, except New India Assurance (NIA), the country’s largest general insurance company, which has ended the year with a Rs 164 crore of net profit, the rest of the three general insurers OIC, NIC and UII have recorded heavy losses of Rs 3115 crore, Rs1674 crore and 2136 crore respectively in FY 2021-22.
OIC, NIC and UII have incurred losses, despite having large investment income of Rs 2,296 crore, Rs 2,650 crore and Rs 2790 crore respectively, due to huge underwriting losses in FY 2021-22. NIA has the largest investment income of Rs 6,665 crore while ICICI Lombard General Insurance (Rs 3,000 crore), Bajaj General Insurance Rs 1,760 crore, HDFC Ergo General Insurance (Rs 1,279 core) are the top three private sector general insurers in terms of investment income.
Overall, 20 full-fledged private sector general insurers, led by Bajaj Allianz General Insurance, have been able to grow their net profitability by 46 per cent year on year (y-o-y) to Rs 4,100 crore in FY 2021-22.
