Deregulation of motor third-party premiums will have a big impact, says New India Assurance

Q&A Transcript of Neerja Kapur, CMD, New India Assurance Co

What's happening on a business-on-the-business side? Premium growth in the last two quarters came down from 15 to 18 percent levels now to between 5 and 7 percent. This is lower than what the industry growth has been or what the peers have achieved. Could you tell us what's currently happening and what could FY23 growth and beyond looks like?

A: India is one of the fastest growing economies in the world having clocked about 5.5 percent average gross domestic product (GDP) growth over the past decade. Economic growth in India is estimated to grow at about 6.9 percent in 2022-2023. And with a proactive set of administrative actions taken by the government, a flexible monetary policy, softening of the global commodity prices, also supply chain bottlenecks, we're seeing them moving of, inflationary pressures have eased to some extent in India. So three mega trends, global offshoring, digitalization and energy transition are setting the scene for a good economic growth in the country as compared to the rest of the world. India has emerged as the fastest growing major economy in the world.

Q: In terms of New India Assurance itself if you can be a little specific in terms of what can we expect in terms of premium growth, as I pointed out, that has slowed down meaningfully, what's your own understanding of how the numbers will progress from here?

A: We see a very good growth in the motor segment. And with the new vehicle sales showing a very healthy trend, we see the automobile sales increasing across all categories, and three of our biggest original equipment manufacturers (OEM) partners that is Maruti, Hyundai and Tata Motors, their sales are also at an all-time high compared to the previous year.

Health business continues to grow at a very healthy pace. And the predominant reason being the pandemic, which has made everyone more aware of life's uncertainties.

We're also seeing a lot of push from the IRDAI to cover the missing middle and a lot of action is happening in this scene.

Property is also witnessing a much better traction compared to the recent years.  It is mainly driven by the demand from residential and commercial segments. So, going forward too, we expect health and motor to be the key growth drivers and there is a lot of scope for innovative products. And New India Assurance as a company is targeting growth without compromising on our bottomline (the profit). We're trying to increase our revenue but not at the cost of our margin.

Q: Since you're talking about good growth in the motor segment, I wanted your thoughts on two things. One is deregulating the motor third party premium and the other one is making Accident Insurance mandatory.  How would this really affect or change your growth prospects?

A: This will really impact the segment and we expect to see a huge growth in the motor sector. In fact, we are seeing the motor segment growing at an extremely good pace. Like I mentioned earlier the automobile sales are increasing and the deregulation in the sense that all the companies are targeting the dealer business and getting our OEM partners - Maruthi, Hyundai and Tata Motors, whose sales are also at an all-time high. So we expect the segment to grow in a very healthy pace.

Q: Two things - one on the premium growth side, what should we expect over the next year out? Would you get back into the 15 percent or more kind of premium growth?

A: I would say yes. The industry as such is possibly growing in that segment. We are seeing till November, the growth in sales of the entire industry is at about 15 percent. Like I mentioned New India is focusing on growth with profitability only. So, we are focusing on the segment which would be less risk prone. And so, our growth would be or rather I would estimate it to grow in the range of about 8-10 percent.

Q: Quarter two combined ratio was at 121 compared to 130 in the previous quarter. This has also dropped to 109. Could you tell us where is this jump coming from and when can you get back to the 110 kind of levels?

A: Our combined ratio has shown an improving trend in the last few quarters. Like I mentioned, we are focusing on the profitable lines of business and we are trying to price the policies at the correct price rather than just focusing on discounts. So, you would definitely see a profitable growth and so, the combined ratio will be coming down in the quarters to come.