PSU general insurers gain ground as private peers retreat from loss-heavy segments

Fire loss ratios have climbed from around 50 percent to close to 70 percent, while the motor combined ratio has crossed 120 percent, prompting private pullbacks amid tighter and costlier reinsurance, according to analysts and management-commentary post-earnings.

Public sector general insurers may have seized a market opening in Q1 FY26, growing premiums at mid-teen rates and lifting their share by over 200 basis points as private peers retreated from loss-heavy segments.

Fire loss ratios have climbed from around 50 percent to close to 70 percent, while the motor combined ratio has crossed 120 percent, prompting private pullbacks amid tighter and costlier reinsurance, according to analysts and management-commentary post-earnings.

PSUs, on the other hand, with more pricing flexibility and broader risk appetite, may have stepped in with competitive rates, faster claims settlement, and better digital servicing.

According to industry data, premiums in June 2025 totalled Rs 23,422.5 crore, up 5.2 percent year-on-year, with PSU growth far outpacing the industry average, delivering tangible market-share gains.

New India Assurance solidified its lead with a market share that rose to 15.51 percent in June 2025, up from approximately 14.67 percent in the June 2024 quarter. Oriental Insurance followed with its share from 6.46 percent to 7.34 percent over the same period, while National Insurance climbed from 4.78 percent to 5.04 percent. Together, these gains helped lift the combined market share of PSU general insurers by more than 200 basis points in Q1 FY26.

These changes come against a backdrop of multi-year private sector dominance. For over a decade, PSU market share in the general insurance sector had been on a steady downward trajectory. In Q1 FY26, the movement is not just in one PSU but is consistent across New India, Oriental, and National.

According to earnings-call commentary and analyst reports, this shift aligns directly with a change in market behaviour. Private players, facing higher loss ratios and reinsurance costs, have consciously pulled back from segments like fire, certain motor categories, and group health.

ICICI Lombard, for instance, grew retail health and motor volumes in Q1 but flagged worsening underwriting economics. Its combined ratio worsened to about 102.9 percent and the management, speaking to Moneycontrol, said it had pulled back from certain group and commercial pockets where loss experience and reinsurance costs have become unfavourable.

Other large private players show the same lines of stress.

HDFC ERGO’s recent rating rationales and corporate filings underline a related point, which is that motor (especially TP and OD pockets) and certain commercial lines have seen higher net loss ratios through in Q3 FY25 and Q4 FY25, denting profitability and forcing tighter capital allocation. Reports by ratings agencies, as well as comments from the management during earnings call, show that motor reserving and loss inflation have materially affected return on equity.

SBI General’s Q1 print provides a counterpoint that also supports the private pullback thesis. The company posted 21.5 percent year-on-year topline growth in Q1 FY26, and it has gained a mere 47 bps share in motor and larger increases in health and PA.

According to analysts, this dynamic has helped PSUs and state-backed insurers mobilise noticeably higher premium flows.

Smaller private insurers and mid-tier players are, too, echoing the cautious refrain.

Shriram General’s CEO Anil Aggarwal had told Moneycontrol that the company is “not in a hurry to burn our fingers,” skipping riskier tenders and bidding selectively on crop and commercial placements to avoid unprofitable exposure, admitting that some volumes are being left on the table to protect loss ratios and solvency.

Analysts have said, the reinsurance market may have compounded the pressure. The reinsurer capacity and terms for property, fire and certain commercial lines may have tightened after a string of loss events such as the Air India crash, raising the cost of transferring risk.

“Several private underwriters have signalled they will avoid volumes where reinsurance cover is scarce or expensive. That raises the effective marginal cost of writing such business and makes selective retrenchment economically rational,” analysts explained.

“Besides, private insurers have been managing combined ratios in the 102-104 percent range in recent quarters, already under pressure from claims inflation and reinsurance costs. Chasing volume in loss-heavy lines like fire, certain motor segments, and group health would likely have pushed combined ratios even higher, eroding underwriting profitability further. Instead, many private players have chosen to forgo that business until pricing catches up with risk, even if it means conceding market share in the short term,” they added.

For PSUs, the calculus is different.

Backed by larger balance sheets, wider reinsurance access through GIC Re, and often more flexibility on margins, they can absorb thinner underwriting spreads, at least in the near term, in exchange for higher premium mobilisation and market-share gains.

By stepping into these gaps with competitive pricing, faster claims settlement, and expanded digital channels, they’ve been able to capture business volumes that private players have consciously left on the table, he said.

According to analysts, the next two quarters will be critical in determining whether this shift is temporary or structural.

He points to three key indicators: line-level loss ratios in fire, motor third-party, and group health, the terms and pricing of reinsurance placements, and the trajectory of PSU combined operating ratios.

If PSUs can hold their combined ratios steady while sustaining elevated premium growth, they could cement a lasting share advantage. But if claims costs rise further or reinsurance terms ease enough for private capital to return at more sustainable pricing, the pendulum could swing back quickly.

“If PSUs can keep combined ratios stable while sustaining higher premium mobilisation, the shift could become structural. If not, it will likely revert as private capital re-enters at repriced levels," analysts pointed out.