Non-life insurers profit declines by 30% in FY 2015-16

The non-life insurance industry witnessed a substantial decline in its profitability last fiscal.

The general insurance industry recorded a net profit of Rs.3238 crore in FY 2015-16 as against Rs.4639 crore in FY 2014-15, a decline of over 30%, shows IRDAI’s annual report.

IRDAI annual report states, “The PSU companies reported a net profit of Rs.1500 crore while private sector insurers reported a net profit of Rs.1300 crore. Specialised non-life insurers like Agriculture Insurance Company (AIC) reported a net profit of Rs.580 crore while standalone health insurers reported a net loss of Rs.177 crore in FY 2015-16.”

IRDAI data shows that the profitability of PSU general insurers was badly hit. The report said that the net profit of all the PSU non-life insurers put together had declined by 52%. Among the four PSU insurers, National insurance had recorded a massive decline of 84% in its profitability compared to preceding fiscal.

Net profit of PSU non-life insurers

Source: IRDAI

Similarly, the private non-life insurers reported a decline of 18% in its profitability. The net profit of private players stood at Rs.1333 crore in FY 2015-16 as against Rs.1640 crore in the preceding fiscal. According to IRDAI’s annual report, of 18 private sector non-life insurance companies, 11 companies witnessed profit.

Among top ten non-life insurers, ICICI Lombard recorded a net profit of Rs.507 crore in FY 2015-16 as against Rs.536 crore in FY 2014-15.

Bajaj Allianz was the only one to record a marginal growth in its profitability. The company saw a net profit of Rs.564 in FY 2015-16 compared to Rs.562 crore in FY 2014-15.

The decline in profitability was primarily due to increase in incurred claim ratio, poor underwriting practices and poor catastrophe management.

The IRDAI’s annual report shows that the incurred claims ratio of the non-life insurance industry stood at 85% in FY 2015-16 as against 81% preceding fiscal.

Incurred claim ratio is the net incurred claims to net premium. Simply put, it is claims received for the premium paid towards insurance policies in a year; hence, a low incurred ratio indicates healthy growth prospects and higher profitability in non-life business.

Sanjay Datta, Chief – Underwriting and Claims, ICICI Lombard General Insurance had earlier told Cafemutual that the declining profitability in the non-life insurance industry is due to inefficiency in quoting right pricing for a given risk. Also, external factors like inflation and poor catastrophe management has added to the woes of the industry, he added.

Barring Apollo Munich Health Insurance, all the standalone health insurers incurred losses in FY 2015-16. Apollo Munich Health Insurance witnessed a net profit of Rs.7 crore last fiscal.