India’s state-owned general insurers are seeing their market share shrink, dropping below 50% for the first time in 2018-2019, according to a study by GlobalData.
The study revealed that the gross direct premium income (GDPI) reported by the 25 general insurers in the Indian market totalled INR1.5 trillion (US$22 billion) in the year ended March 31, 2019. State-owned insurers accounted for 45.8% of the amount. This is a huge drop from their 54.8% market share in 2014-2015.
According to Madhuri Pingali, insurance analyst at GlobalData, in the past decade, private sector insurers have significantly grown their market presence due to improvements in pricing strategy, product innovation and distribution efficiency.
“The most important differentiator, however, is the deployment of technology, which helped them in providing a superior customer experience compared to their public sector rivals,” Pingali said.
This was demonstrated by the weak growth of the state-owned insurer’s GDPI at 1% in 2018-2019. In contrast, private insurers’ GDPI surged by 24%. This was particularly highlighted in the motor and health insurance businesses, which account for a combined two-thirds of general insurance premiums.
“The alleged unfair distribution practices by some private motor insurance carriers seem to have curtailed the public companies’ ability to grow and resulted in private insurers gaining market share at the expense of public insurers,” said Pingali. “Adding to this is the delay in the merger of the three state-owned firms National Insurance Company, Oriental Insurance Company and United India Insurance Company. The proposed merger plan of three of the largest insurers was announced in February 2018 and was expected to help improve profitability and bring efficiency. The slow pace of progress has contributed to a period of further uncertainty.”