Motor third-party insurance and health — two portfolios that non-life insurers have been avoiding due to low margins — have been responsible for the 12% growth recorded by the industry in 2007-08. Motor third-party grew close to 50% while health insurance grew 55% in a year which saw property insurance market shrink due to intense competition.

In 2007-08, non-life insurers wrote business amounting to Rs 28,126 crore — an increase of Rs 3,128 crore over last year. This increase was despite premium from fire insurance shrinking 15% to Rs 3,516 crore. Fire was not the only business which saw lower collections. Aviation insurance, which is driven by the international reinsurance market, declined by 28% to Rs 303 crore despite large-scale fleet expansion by airline companies.

According to industry sources, insurance rates for airlines have been at the softest level for nearly a decade. The industry has managed to grow despite such intense competition because of motor and health. In motor third-party (where rates continue to be administered), industry premium rose 50% to Rs 4,617 crore. Health insurance grew 55% to Rs 4,969 crore.

Another revealing feature of last year’s business data is that the public sector account for 67% of motor third party liability and 63% of health insurance even though its overall share has declined to 60%. New India continues to be the largest health insurer with a premium of Rs 1,209 crore or 24.3% of the market followed by ICICI Lombard which has a 17.7% of the market share.

In 2007-08, health insurance in India grew to be a billion dollar business for the first time. If the Rs 164 crore business done by specialised health insurance is taken into account the industry premium amounts to Rs 5,133 crore ($1.2 billion). Fire insurance business was not the only portfolio to be hit by competition. Motor own-damage portfolio grew only 7.9% to Rs 8,186 crore — a growth that does not even match the rise in car sales. This was because own-damage premium rates also shrunk because of competition.

As a result of the sharp growth in health and decline in fire insurance, the dynamics of non-life insurance business in India has changed. Health insurance is now the single largest business after motor insurance, accounting for a little below 18% of overall business as against 13% last year. Fire (property) insurance, which at one time was the mainstay of non-life insurers, now accounts for a mere 12.5% of business down from 16.6% last year. What this means for the industry is that no company that wants to be a significant player in India can ignore health or motor insurance. Motor insurance and health now account for 63% of all non-life premium in India as against 55.3% a year ago.