{"id":388300,"date":"2024-08-29T10:54:38","date_gmt":"2024-08-29T05:24:38","guid":{"rendered":"https:\/\/zerodha.com\/z-connect\/?p=388300"},"modified":"2024-08-29T10:54:39","modified_gmt":"2024-08-29T05:24:39","slug":"its-the-economy-stupid-does-nobody-want-insurance-any-more","status":"publish","type":"post","link":"https:\/\/zerodha.com\/z-connect\/subtext\/its-the-economy-stupid-does-nobody-want-insurance-any-more","title":{"rendered":"It\u2019s the economy, stupid! Does nobody want insurance any more?"},"content":{"rendered":"\n

We love IndiaDataHub\u2019s weekly newsletter, \u2018<\/em>This Week in Data<\/em><\/a>\u2019, which neatly wraps up all major macro data stories for the week. We love it so much, in fact, that we\u2019ve taken it upon ourselves to create a simple, digestible version of their newsletter for those of you that don\u2019t 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. <\/em><\/p>\n\n\n\n

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What\u2019s up with private life insurance?<\/strong><\/h2>\n\n\n\n

Here\u2019s a rough-and-dirty story of Indian insurance: British India had all sorts of insurance companies \u2014 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). <\/p>\n\n\n\n

Other types of insurance \u2014 general insurance \u2014 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.\u00a0<\/p>\n\n\n\n

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.\u00a0<\/p>\n\n\n\n

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\u2019s biggest life insurer. And right now, it\u2019s growing faster than the rest of the industry.\u00a0<\/p>\n\n\n\n

The thing is: the life insurance industry has been growing rather slowly off-late. The industry\u2019s \u2018new business premiums<\/strong>\u2019 \u2014 the premiums insurers have earnt from new insurance contracts \u2014 went up at a middling 14%, year-on-year. While this might not look too bad in the abstract, these are the industry\u2019s worst numbers since November.\u00a0<\/p>\n\n\n\n

There\u2019s 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 \u2014 all the new private sector insurers \u2014 saw weak growth this July, at just 7% year-on-year.\u00a0<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

This is part of a larger trend, in fact. Of the last seven months, LIC outpaced the growth of private insurers in five. LIC\u2019s share of new business premiums (considering a 12-month rolling average) have risen to ~60%, after briefly dipping below that mark last year. It\u2019s currently at its highest point in a year, up almost 3% from the end of last year.\u00a0<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n
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On to the rest of the industry<\/strong><\/h2>\n\n\n\n

While LIC housed India\u2019s 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 \u201creinsurer\u201d \u2014 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.\u00a0<\/p>\n\n\n\n

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:\u00a0<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

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\u2019t 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 \u2014 to the tune of 30% year-on-year.\u00a0<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n
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EV two-wheelers zoom!<\/strong><\/h2>\n\n\n\n

Here\u2019s some great news for our green transition \u2014\u00a0 EVs are quickly grabbing a noticeable chunk of India\u2019s 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%<\/em> in the same period. EV\u2019s made for 7% of July\u2019s two-wheeler market \u2014 the second highest on record, after the 9% seen in March.\u00a0<\/p>\n\n\n\n

India is, in fact, the world’s second largest two-wheeler EV market<\/a>, after China. <\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

Who\u2019s buying all these EVs? Well, there are some surprises in store. <\/p>\n\n\n\n

You\u2019d imagine the greatest push for EV adoption was happening in rich, urbanised states, and that\u2019s definitely true \u2014 but only to an extent. States like Karnataka, Maharashtra and Tamil Nadu definitely feature up there, well above the national average. But they don\u2019t dominate the list. <\/p>\n\n\n\n

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 \u2014 8.7% \u2014 which was higher than richer states Andhra Pradesh, Gujarat and Tamil Nadu, or even cities like Delhi and Chandigarh.\u00a0<\/p>\n\n\n\n

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. <\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n
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Aviation finally takes off<\/strong><\/h2>\n\n\n\n

The first half of this year was mediocre for domestic aviation. The year-on-year growth of the sector hadn\u2019t even touched 5% between January and May. Lately, however, things have looked a little better. <\/p>\n\n\n\n

In June, the sector\u2019s year-on-year growth jumped up to 6%. In July, it went up further, to 7%. The sector\u2019s \u2018passenger load factor<\/strong>\u2019 \u2014 its efficiency in carrying passengers \u2014 has grown year-on-year for the third consecutive month, after three months when it was flat, or even dropped slightly. <\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n

Digging deeper, Indigo remains India\u2019s biggest airline, carrying more than 60% of all our passenger traffic. That said, Tata\u2019s 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 \u2014 AirAsia, Spicejet and Akasa \u2014 are losing their market share as well.\u00a0<\/p>\n\n\n\n

\"\"\/<\/figure>\n\n\n\n
\n\n\n\n

That\u2019s all for the week, folks!<\/p>\n","protected":false},"excerpt":{"rendered":"

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