Stringent traffic penalties and multi-year TP policies on new vehicles will help capture the untapped third party (TP) business in India. Profitability may be higher likely due to higher inherent profitability in two-wheeler and car segments.

Increase in penetration of Motor Insurance

Insurance compliance with CV operators is high but lower with cars in the interiors and the lowest in two-wheelers. Industry and market players have lately been bullish on increase in motor TP penetration owing to two factors:

(1) The Supreme Court has made it mandatory for the vehicle buyers to purchase three and five year TP policies during purchase of new cars and two-wheelers, respectively.

(2) The new Motor Vehicle Act, 2019 (which increased traffic penalties on uninsured vehicles) is driving penetration in motor TP as well.

Large players like ICICI Lombard have 82% share of cars and two-wheelers in their motor business; the ratio is 60% for Bajaj Allianz. Hence, these players may be beneficiaries of higher penetration in cars and two-wheelers. More importantly, profitability may be higher in these segments as well.

The potential headroom for growth through increased compliance levels is about Rs100 bn (~6% of the total general insurance premiums in India).

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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