It’s the economy, stupid! Does nobody want insurance any more?
We love IndiaDataHub’s weekly newsletter, ‘This Week in Data’, which neatly wraps up all major macro data stories for the week. We love it so much, in fact, that we’ve taken it upon ourselves to create a simple, digestible version of their newsletter for those of you that don’t like econ-speak. Think of us as a cover band, reproducing their ideas in our own style. Attribute all insights, here, to IndiaDataHub. All mistakes, of course, are our own.
What’s up with private life insurance?
Here’s a rough-and-dirty story of Indian insurance: British India had all sorts of insurance companies — life and otherwise. As India turned independent, however, the government soured on the industry. Right off the bat, in 1950, the government combined ~250 life insurers into the Life Insurance Corporation of India (LIC).
Other types of insurance — general insurance — stayed private for another couple of decades. But regulation on this sector slowly crept up as well, until ~100 general insurers were finally combined and nationalised into the General Insurance Corporation and its subsidiaries in 1973.
This remained the state of affairs until this millennium. After liberalisation, plans were drawn up to privatise Indian insurance, much like the rest of the financial industry. In the year 2000, a fresh regulatory structure was introduced, with the establishment of the IRDAI. And then, slowly, the industry was re-privatised.
Private insurers cropped up. In the life insurance sector, they slowly began wresting small bits of the market away from the government-owned LIC. This process has been far from straightforward, however. Two decades into the latest phase of this experiment, the government-owned LIC is still, by an order of magnitude, India’s biggest life insurer. And right now, it’s growing faster than the rest of the industry.
The thing is: the life insurance industry has been growing rather slowly off-late. The industry’s ‘new business premiums’ — the premiums insurers have earnt from new insurance contracts — went up at a middling 14%, year-on-year. While this might not look too bad in the abstract, these are the industry’s worst numbers since November.
There’s an interesting thing, though: LIC, the pre-liberalisation behemoth, is chugging along just fine. Its own new business premiums have grown by 20%, year on year. The rest of the industry, though — all the new private sector insurers — saw weak growth this July, at just 7% year-on-year.
This is part of a larger trend, in fact. Of the last seven months, LIC outpaced the growth of private insurers in five. LIC’s share of new business premiums (considering a 12-month rolling average) have risen to ~60%, after briefly dipping below that mark last year. It’s currently at its highest point in a year, up almost 3% from the end of last year.
On to the rest of the industry
While LIC housed India’s life insurance industry, its genral insurance companies were merged into the four subsidiaries of the General Insurance Corporation (GIC). Once the industry was liberalised, the four subsidiaries were broken off from GIC, which was turned into a “reinsurer” — an insurance company for insurance companies. The general insurance companies were never the household names that LIC was. And so, upon liberalisation, private insurers were relatively more successful at wresting control of the market.
At the moment, though, the entire sector is in a slowdown. Over the last two months, the premiums collected by the sector have only grown in the single digits, after healthy mid-teens growth before. In general, growth has been much slower this year than in 2023, as this graph should tell you:
Since the beginning of this year, the sector has grown at ~12% compared to the same period last year. This hides a lot of variance within the sector, however. Many individual insurers haven’t seen much growth. Some, in fact, have declined. At the same time, specialised health insurers like Niva Bupa and Care Health have seen very strong growth — to the tune of 30% year-on-year.
EV two-wheelers zoom!
Here’s some great news for our green transition — EVs are quickly grabbing a noticeable chunk of India’s two-wheeler market! Take the month of July: while sales of two-wheelers, in general, were up 17% year-on-year, the sale of EVs grew by 100% in the same period. EV’s made for 7% of July’s two-wheeler market — the second highest on record, after the 9% seen in March.
India is, in fact, the world’s second largest two-wheeler EV market, after China.
Who’s buying all these EVs? Well, there are some surprises in store.
You’d imagine the greatest push for EV adoption was happening in rich, urbanised states, and that’s definitely true — but only to an extent. States like Karnataka, Maharashtra and Tamil Nadu definitely feature up there, well above the national average. But they don’t dominate the list.
The state making the quickest transition, it seems, is Goa. In the first four months of the year, one in every five two-wheelers sold in Goa were electric. Next comes Kerala, with a 11% market share over the first four months of the year. Odisha saw a surprisingly high share of electric vehicles in its two-wheelers — 8.7% — which was higher than richer states Andhra Pradesh, Gujarat and Tamil Nadu, or even cities like Delhi and Chandigarh.
Meanwhile, states like Uttar Pradesh, Haryana and West Bengal are well below the national average, with electric vehicle sales only making 2-3% of their total two-wheeler sales.
Aviation finally takes off
The first half of this year was mediocre for domestic aviation. The year-on-year growth of the sector hadn’t even touched 5% between January and May. Lately, however, things have looked a little better.
In June, the sector’s year-on-year growth jumped up to 6%. In July, it went up further, to 7%. The sector’s ‘passenger load factor’ — its efficiency in carrying passengers — has grown year-on-year for the third consecutive month, after three months when it was flat, or even dropped slightly.
Digging deeper, Indigo remains India’s biggest airline, carrying more than 60% of all our passenger traffic. That said, Tata’s consolidated airline giant, Air India-Vistara, is slowly flexing its muscles. This year, it crossed a market share of 20%, at the cost of everyone else in the market. Indigo has lost some market share to it in the last two months. The other airlines — AirAsia, Spicejet and Akasa — are losing their market share as well.
That’s all for the week, folks!
