Indian Motor Insurance – Favorable Auto Sales Mix Driving Premium Growth: Motilal Oswal

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The motor insurance premium has seen a compound annual growth rate of 5.5% over FY20-23, with year-to-date growth standing at 15%. Specifically, for motor own damage, the three-year CAGR/year-to-date growth has been 6.2%/18%, whereas for the motor third party segment, the CAGR/YTD growth has been 5.1%/11%.

The auto industry sales for passenger vehicles/two-wheelers have registered a three-year CAGR of 12%/-4%, while YTD growth stood at 9%/12%.

New vehicle sales account for a significant portion of the motor segment’s insurance premium. However, the correlation is stronger with the growth of the industry than the volume growth.

We note that the auto industry trends such as rising share of utility vehicles, preference for top-end models, the growing adoption of CNG/EVs, acceptance of automatic variants, and the rising popularity of scooters and higher cc two-wheelers, have all played a favorable role for the motor insurance industry.

These trends are structural in nature and will provide support to the motor insurance premium growth even in a phase of a slow auto sales growth.  We note that the insurance premium for CNG vehicles of the same variant is 18% higher, for automatic vehicles, it’s 4% higher, and for UVs of the same CC, it is 12% higher.

We remain positive of ICICI Lombard General Insurance Company Ltd. as it improves its market share in the auto segment and we maintain our Buy rating on the stock with a one-year price target of Rs 1,900 (33 times FY26E earnings per share).

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