The underwriting losses for the general insurance industry saw a 22 percent year-on-year (YoY) drop in FY18. According to the latest figures released by the IRDAI Annual Report 2017-18, the industry reported a loss of Rs 15,341.42 crore as compared to Rs 19,663.53 crore in the year ago period.
A combination of factors including better risk selection, reduction in unviable discounts and better pricing strategies have led to improvement in underwriting performance.
Public sector versus private sector
The public sector insurers' losses decreased by 21.29 percent YoY to Rs 12,603 crore in FY18 from Rs 16,012 crore in FY17.
IRDAI data showed that the private sector insurers' reported decrease in underwriting losses from Rs 3,176 crore in FY18 from Rs 2,085 crore a year ago. However, standalone health insurers reported increase in underwriting losses in FY18 to Rs 436 crore from Rs 261 crore in FY17.
The underwriting losses of specialised insurers slightly increased to Rs 218 crore in FY18 from Rs 214 crore in the year ago period. The ratio of underwriting losses to net earned premiumfor the general insurance industry in FY18 was 15.27 percent as compared to 22.16 percent in FY17.
During the year, there were five insurers who reported an underwriting profit. The number of insurers reporting an underwriting profit increased to five in FY18 from four in the year ago period.
Incurred claims go down
The incurred claims ratio (net incurred claims to net earned premium) of the general insuranceindustry was 85.26 percent during 2017-18 which is less than the previous year figure of 90.91 percent.
Here, the incurred claims ratio for public sector insurers was 93.73 percent for the year 2017-18 which was lower than the 100.02 percent of the previous year.Underwriting performance of a general insurance company is crucial because it reflects whether the premiums collected by a company is adequate to pay the claims.