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Insurance Industry Overview: The Growth of Motor Insurance in India

Simran Kaur 21 January 2021

In recent years the government of India has taken numerous initiatives to promote the adoption of digitization and technology in various sectors and industries.

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Insurance is one such sector that is becoming the chalk horse in using technology and digitization for creating a win-win situation for its customers, insurers, and distributors at the same time.

Coverfox an online insurance broker licensed by IRDAI has been one of the frontrunners in implementing technology and providing a complete hassle-free fully digital insurance comparing, buying, and renewing platform. Coverfox’s sole aim is to make insurance simple for the vast population of India. Coverfox simplifies complex insurance terms in a simple language thus enabling everyone to buy insurance from the comforts of their home, office, or on the go through their mobile phone.

Insurance density has seen a growth over the years and the industry has started tapping various aspects of everyone’s life through a diverse mix of products like Life Insurance, Car Insurance, Bike Insurance, Health Insurance, Travel insurance, and more. This has been made possible due to increasing awareness about the importance of insurance in people’s life, increased affordability, regulatory push, and ease of buying insurance thanks to online brokers like Coverfox.

Let’s have a look at how motor insurance has grown in India.

General Insurance Overview:

Gross premiums written in India hit the mark of Rs 5,78,000 crore ($82.8 billion) in FY19, with Rs 4,08,000 crore ($58.5 billion) from life insurance and Rs 1,69,000 crore ($24.3 billion) from non-life insurance.

Overall insurance penetration in India has risen to 3.69% in 2017 from 2.71% in 2001. The non-life insurance industry registered a penetration of 0.97% in FY 2018-19 as compared to 0.93% in FY 2017-18. The density of non-life insurers also grew marginally from $18 in FY 2017-18 to $19 in FY 2018-19. The contribution of increasing adoption of technology, policy reforms, positive demographic developments, and education have contributed to this growth.

Opportunities for online insurers

  • The rapid buildout of digital technology will become a key facilitator:-

Increasing Internet penetration (with the number of users in India expected to rise from 429 million in 2017 to 829 million by 2021 at the rate of 17.9 per cent) will continue to influence the insurance business as well as other industries.

  • COVID-19 has rapidly shifted insurance purchases in India to online modes:-

In a Covid-19 consumer survey conducted by IPSOS, It was found that Indian consumers are the second most active in APAC when it comes to searching for and purchasing new insurance policies. Pandemic contributed to the accelerated use of digital platforms in India, offering insurance companies a vital new pathway to connect with and serve customers. Owing to this recent development, a seamless quote to buy journey, faster claim process/payment is need of the hour.

  • Value-Added Features:-

Innovative product offerings that are context-sensitive with a simple structure have a higher appeal for new-age customers.

Motor Insurance Overview:

  • GDP Underwritten:

Motor insurance continues to be the biggest line of business for general (non-life) insurers.

Motor segment 2017-18 2018-19 2019-20
Gross direct premium (Rs. Cr) 59,246 64,522 69,208
Market share 39.32% 38.08% 36.56%
  • Market share:

Motor insurance accounted for 36.6% of non-life insurance premiums earned, followed by health insurance at 27.3% in FY20. Upto November’20, the Motor segment (OD, TP & Composite) held a share of 32.59%, the highest share in the non-life insurance market.

  • Past Growth Rate:

As per the data published by the Indian insurance regulator, the motor insurance business reported a growth rate of 8.91% in India in 2018-19. India Motor Insurance Market registered a CAGR of 11.36% over the period, 2012 – 2018.

  • Private vs Public sector

The market share of private sector companies in the non-life insurance market rose from 13.12% in FY03 to 54.72% in FY19 (up to Feb 2019).

  • No. of Policies sold - Auto Insurance:
FY 2016-17 FY 2017-18 FY 2018-19
90,731,975 97,129,743 100,746,451
  • Average Premiums per Policy:-

    • The average Own Damage (OD) premium (excluding Long Term Policies) for Private Cars is Rs. 7,645 whereas for Two Wheelers the same is Rs. 502.
    • For Goods Carrying Vehicles, the average OD premium is Rs. 5,904 and for Passenger Carrying Vehicles (Other than 3 wheelers) it is Rs 6,331.
  • Net Retentions as a percentage of Gross Premium:

For FY2018-19 Motor segment reported a retention ratio of 91.01 against 98.99 in the previous financial year.

  • Claims:-

    • Among the various segments, the Motor segment had the highest claims ratio at 90.60 percent (FY18-19).
    • Around 57% of the comprehensive policies carried a No Claim Bonus discount in them.
    • Six states: Maharashtra, Tamil Nadu, Uttar Pradesh, Karnataka, Gujarat, and Delhi, contribute nearly 50% of the total policies and claims.
    • Private cars constitute 64% of the total settled OD claims in terms of number with a median claim amount of Rs.14,584, which has shown an increase of 5% over the previous year.
    • Two-wheelers occupy a share of 27.9% of the total number of claims settled with a median claim amount of Rs 5,298.
    • The mean paid amount for both the classes was at Rs. 28,580 and Rs. 7,892 respectively. This indicates that the mean amount has increased for Private Cars whereas it has decreased for Two Wheelers, both nominally compared to FY 2017-18.
  • Top Players

Bajaj Allianz General Insurance Co. Ltd, Bharti AXA General Insurance Co. Ltd., ICICI Lombard General Insurance Company Ltd., Tata AIG General Insurance Company Ltd, HDFC ERGO General Insurance Company Ltd., New India Assurance Co., Oriental Insurance Co. United India Insurance Co., Reliance General Insurance Company are some of the key players in the motor insurance industry in India.

Types of Policies

Distribution of premiums across motor insurance types

Motor insurance policies comprise of the following categories:-

a. Liability Only Policy: Statutory requirement as per requirements of the Motor Vehicles Act, 1988. Liability Only cover is also known as Act Only cover. This coverage is offered as per the rates fixed by IRDAI (Insurance Regulatory Authority of India), based on the capacity of the vehicle.

b. Package Policy: Liability Only Policy + Damage to owner’s Vehicle usually called O.D Cover. The amount of sum that is insured under a motor insurance policy is determined by the present market value of the vehicle. The value of the vehicle is called IDV or the Insured Declared Value. The deflated value of the vehicle, which is called a depreciated value, is determined by the vehicle’s age.

Item Motor OD Motor TP Total Motor
FY Growth 0.25% 12.15% 7.26%
2019-20 GDP (₹ Cr) 26552.53 42655.62 69208.15
2019-20 Share 38.37% 61.63% 36.56%
2018-19 GDP (₹ Cr) 26487.50 38034.85 64522.34
2018-19 Share 41.05% 58.95% 38.08%

Distribution channel-wise gross written premium mix:

The highest share of 42.30% in FY19 was held by individual agents followed by brokers at 31.12%. The regulatory authority in 2018, added a new distribution channel MISP (Automotive sellers) in the mix.

FY 2018-19 / (GDP Rs. Cr.) Motor OD Motor TP Motor total Share
Ind. agents 7853.79 19442.08 27295.87 42.30%
Corp. agents - banks 946.66 1456.23 2402.89 3.72%
Corp. agents - others 2084.16 3464.71 5548.87 8.60%
Brokers 11684.51 8393.39 20077.9 31.12%
Referral 0.68 3.1 3.78 0.01%
Direct business 1382.98 2276.02 3659 5.67%
Microinsurance agents 0.02 0.07 0.09 0.00%
Others 2534.69 2999.22 5533.91 8.58%
26487.49 38034.82 64522.31

Vehicle Industry Overview

Motor insurance has been compulsory in India since 1988. According to the reports, the number of new cars sold annually increased with a CAGR of 6% between 2013 and 2017. Cars and bikes are one of the major transportation methods in India, making it one of the largest segments.

Uninsured vehicles as a percentage of vehicles on Indian roads for FY19 remained at a high of 57 percent and in 15 states, more than 60 percent of the vehicles were uninsured, thus showing a slight increase over the previous financial year.

The growth of uninsured vehicles has not shown any sign of slowing down and in fact, the total uninsured vehicles count in the country has been increasing at a CAGR of 13.07% per annum over FY18-19.

Uninsured Vehicle Proportion by state:

Summary of motor registrations by vehicle category

  1. Two-wheeler is the major driver among all vehicle classes in contributing to India’s high uninsured rate. The total number of Two-wheelers on Road in FY 18-19 stood at 17.59 Crore, while the total number of policies which were sold for Two-wheelers in the FY 18-19 stood at 5.9 Crore.
  1. Similarly, sales of policies for cars are growing at a CAGR of 6.30% per annum and vehicles on road for cars are growing at 8.91% per annum. This is an alarming situation and shows that even after the statutory mandate of compulsory TP liability insurance, the compliance rate is very low.

IRDAI Recent Developments (2020):

  • The IRDA recently issued a circular to withdraw the long-term insurance for both cars and bikes that came into effect from August 1, 2020. Consequently, cars and bikes will become cheaper.
  • Proposed separate third-party premium category for electric vehicle
  • 'Named Driver' insurance policy proposal, option for private car and two-wheelers
  • Recommended standardized grid for no claim bonus (NCB)
  • Proposed usage of telematics, consumers will not have to pay a huge premium based on the insured declared value (IDV) of the vehicle, the engine capacity, geographical zone, car make, and model rather it will be based on your driving habits.

Road Ahead

The scope of IoT in the Indian insurance market continues to go beyond telematics and customer risk assessment. With several developments in the insurance ecosystem, Demographic factors such as the growing middle class, growing awareness of the need for protection, digital consumers, and the share of uninsured vehicles in India showcase a bright opportunity for the growth of the motor insurance segment.

Coverfox an online insurance broker will continue increasing the reach of insurance to all through its fully online platform. Coverfox is not just about making insurance simple and easy to understand. It also provides free online insurance quotes, 3-day express claims services, unbiased expert advice, a simple and easy to use online platform for comparing, buying, and renewing insurance. Through this approach, you can get covered easily and instantly in no time.

Note: This article has been compiled by taking inputs from various websites, reports, and blog articles mentioned in the references.


IRDAI Reports, Statistical Handbook 2018-19 and Segment wise GDP Data - UPTO November 2020 FY 2020-21

IIB Motor Annual report 2018-19

GIC Yearbook 2018-19

Simran Kaur
Written by Simran Kaur
Simran Kaur, currently a business analyst at Coverfox Insurance and a Young Leader with the India Insurtech Association having previous work experience from OYO and Gromor Finance.