Some insurers in auto-only mode

Mumbai: Although monoline motor insurance companies have not made their presence in India even after the sector was opened up a decade ago, slow growth of property insurances has willy-nilly turned a few companies into predominantly auto insurers. According to data published by the life insurance regulator, three companies — Royal Sundaram General Insurance, Bharti Axa General Insurance and Shriram General Insurance — have more than 70% of their business coming from motor insurance, making them close to monoline companies.      Monoline companies are those with a general insurance licence but choose to focus on one line of business. Although there are specialist health insurers, this is a separate licence category. Speaking at a CII insurance summit recently, IRDA regulator J Harinarayan said that going by current trends some insurers might end up becoming monline companies.      Monoline companies are seen as being good for a line of activity since their specialization helps drive innovation. Although bulk of auto insurance in the private sector is still with larger companies such as ICICI Lombard and Bajaj Allianz, the share of motor in their overall business is lower.      According to Amarnath Ananthanarayanan, CEO, Bharti Axa General Insurance, the company did not start out as a predominantly motor business. "The motor business is losing less money than other businesses and is also one line that is growing fast," he said. As of March 2012, over 71% of Bharti Axa's total premium came from motor insurance, followed by health and other businesses.      "The sales of automobiles have maintained a robust growth, in double digits, even when the economic growth is apparently slowing down. Secondly, the third party insurance in automobiles is compulsory and mandated by law. Moreover, in recent years there have been increases in the third party premium. Lastly, post de-tariffication, pricing in property insurances has witnessed steady fall by way of discounting, resulting only in its modest growth," said Ajay Bimbhet, MD, Royal Sundaram Alliance. In the case of private cars, the industry is witnessing a claims ratio of 65-70%. This means that margins are very thin after providing for management costs. However, chances of catastrophic losses are lower and the business is less cyclic.      "Given the continued demand for cars, road transportation of people and goods and growth of automobile sector, motor insurance segment will continue to grow," says Bimbhet. But at the same time, other branches of non-life are expected to do well as prices have started to harden. And health, despite recent setbacks, is still the fastest growing business in the medium term. "What people forget is that non-life industry does not suffer in a downturn because cutting down on protection is the last thing that businesses want to do at times of stress," says Ananthanarayanan.