The motor insurance segment, being the largest business segment in the general insurance sector, was already facing the brunt of the sluggish automotive market in India and the pandemic has proved to be a double whammy for the insurers.
Neeraj Prakash, Managing Director of Shriram General Insurance, explains how badly the motor insurance sector was impacted during the lockdown and what hopes of recovery can we expect, in conversation with Nirmala Konjengbam. Edited excerpts.
How COVID-19 has impacted the motor insurance business during and after the lockdown?
The automobile sector was witnessing a slowdown even before the pandemic set in. The motor portfolio dipped in April-May because customers delayed renewals and the sale of new cars was minimal.
According to the Supreme Court order in 2018, the insurance companies started offering two types of motor insurance policies - one year of Own Damage (OD) cover along with three years of Third Party (TP) insurance (bundled product) and three years of OD and TP insurance both (long-term cover). Now the three-year OD cover from August 1, has been rolled back while three-year TP insurance will continue.
IRDAI's decision to discontinue 3+3 and 5+5 long-term motor policies for brand new vehicles will hit the ticket size of the insurance policies.
Motor insurance premiums saw a 15.73 per cent decline in the April 1-August 31 period. It is also the first time that the health business has gone on to beat the motor segment to become the biggest non-life industry vertical, as it witnessed a 13 per cent year-on-year growth in the above stated period.
Total motor business premium fell to Rs 22,253 crore in the five months ended August 31, 2020, from Rs 26,406 crore in the year-ago period. As much as Rs 1,850 crore decline was reported by four PSU general insurers only.
The premium rates for motor third-party liability insurance for 2020-21 remain unchanged from last year’s rate.
Overall the growth in the motor is the result of a drop in premium mobilization in commercial vehicles where the fall in sales of new vehicles has been steep.
Going forward how do you see the market behaving? What has been the claim percentage since lockdown?
For motor insurance, the number of claims has come down to less than 5 per cent of the normal which led to some savings for us. Now, since the average claim size is increasing, the next six months will be tough in terms of loss ratio.
We are already providing a variety of exigency services to our policyholders under Roadside Assistance cover. The company provides services by integrating chatbots, therefore digitization has been a great hit with our customers.
We are also working on a self-inspection system that is the best option as it is quick and hassle-free. You only need to take photographs of the damaged vehicle through the link shared by the insurer and the insurer will get back with a rough estimate.
We are investing in the intermediary networks and to provide them with the technological backup needed to boost customer experience.
With several new models being launched and the ensuing festival season, the automobile sector is expected to pick up pace in the coming months.
Shriram General registered Rs 1,001 crore profit before tax (PBT) in the FY19-20. Post lockdown, we are picking up that the premium growth in Q3 and Q4 would be a crucial one. We expect to exceed in both the fields in terms of PBT and premium growth in the current fiscal.
How insurers are handling the motor claims during the pandemic? What are the challenges faced by them?
Today, every organization is adapting to digital and using new tools to engage with customers. We are working on an e-claim procedure of filing for a claim settlement online, without the need to visit the insurance company office. With this new technology, a representative or surveyor will be able to assess your car via video streaming.
Technological innovation has allowed our customers to easily get their two-wheeler or car insurance claims settled within a day without the hassle of fixing appointments and running to and fro from the garage and the company office.