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 Insurance is basically a business based on uncertainty of events. Curiously, the general insurance industry officials while hoping for a growth, are uncertain about the prospects for FY22, as they are faced with negative consumer sentiment; the reduction in cash flow due to withdrawal of long-term motor policy; lower investment yield and muted growth owing to economy affected by Covid-19 pandemic.

The 34-member Indian general insurance industry closed last fiscal with 5.2 per cent growth with a premium of Rs 198,734.68 crore up from Rs 188,916.61 crore logged in FY20.

"The uncertainty is high owing to the Covid-19 pandemic. The consumer sentiment is negative. The health insurance portfolio will continue to do well. The motor insurance business should do well if the economy doesn't deteriorate further. Some sport utility vehicles (SUV) have waiting periods," Roopam Asthana, CEO and the Whole Time Director, Liberty General Insurance Ltd told IANS.

According to him, the two wheeler business depends on the consumer sentiment and confidence while the commercial vehicles will do well if the economy does well.

"In FY22, along with the expected uptick in the health segment, any increase in the premium levels of the Motor TP (Third Party) segment, which was held steady in FY21, could drive the non-life premiums," credit rating agency Care Ratings said in a recent report.

Looking back at the fiscal that went by, Care Ratings said the general insurance industry growth was driven by the private sector who grew at a much faster pace compared to the public sector.

"Within the various segments, fire and retail heath has contributed to the growth in the industry, however, the growth momentum was pulled by the fall in motor insurance premiums," the rating agency said.

"Last year the industry saw growth largely from fire and health insurance segments while the motor insurance business took a hit. The fire insurance business went up owing to upward revision in the premium rates. This year the fire business may not show much of a growth as there is no rate change and the corporates are not putting up new assets - setting up new plants for insurers to insure and log premium growth," Asthana remarked.

Industry officials also said the withdrawal of the long-term motor insurance package policy from August 1, 2020 onwards will also impact the cash flow of the industry players this fiscal.

"The cash flow for the insurers will come down while the cost of renewing a policy will go up. On the investment side, the yield will come down," Asthana remarked.

Owing to the lockdown last fiscal, the underwriting results (simply put premium minus claims pay out) might be positive for the industry players.

"The third quarter results of some insurers last year showed improvements in their combined ratio (combined ratio is claims + expenses divided by premium income). One has to see the fourth quarter results of insurers," Saurabh Bhalerao, Associate Director, Banking, Financial Services Insurance Research, Care Ratings told IANS.

"The underwriting results will depend on the insurer's portfolio. The claims under health insurance policies have gone up due to Covid-19," Asthana said.

The claims under motor insurance and other business have come down owing to the lockdown. Further it is also true that elective surgeries were not there last fiscal owing to the lockdown.

Industry officials like Asthana told IANS that there was not much of a churn with respect to corporate policies as they are renewing their policies with their current insurers.

For non-life insurers, April is the month of major corporate policy renewals.

Corporates may switch insurers owing to bad service experience or when they feel that the insurers have solvency margin pressures.

An insurer with a lower solvency margin might have cash flow issues resulting in delayed settlement of claims and hence corporates might switch to a new insurer.

According to Asthana, the general insurance industry may log 10-12 per cent growth this fiscal if Covid-19 impact reduces and doesn't stay for long.

"The silver lining for the general insurers due to Covid-19 is that people are aware of health insurance. So, it may be easy for the insurers to cross sell their other products. Further the sectoral regulator is coming out with standardised policies making it easy for the buyers to compare products by buy," Bhalerao said.