Reliance General market share has dropped to 3.87% in Apr-Sep 2010, from 6.22% in the previous corresponding period. Data reveals that the decrease in business is across most segments
Reliance General's gross premium underwritten is down by over 21%. This is at a time when the general insurance sector is expanding and no other company is exhibiting negative growth.
Overall, gross premium underwritten for private insurers increased by 25.19% and that of PSU insurers increased by 21.09%. The segment-wise breakup reveals a decline in every aspect of business. So, is this the signal that might take Reliance towards a ultimate merger with Royal Sundaram General insurance?
The health segment gross premium underwritten was almost unchanged, even though other insurers had an average 50% increase. This is a result of increase in premium by almost 500% in Reliance HealthWise, which has put off customers. (Read 'Unhealthy rise in Reliance HealthWise premiums') The full impact of unhealthy increase in premium by almost 500% will be seen over a period, but Reliance must be hoping that some customers will be forced to continue with it as a change in insurer impacts the four-year waiting period for pre-existing conditions to be covered.
According to a broking house, more than 70% of Reliance customers have switched to another insurer due to Reliance's premium hike. "Due to the losses made in the past three years, Reliance had to cover up the same and revise the premium that resulted in the hike. The market reaction to the hike has led Reliance to revamp its portfolio of health policies. As a result, Reliance health insurance is not perceived as competitive in the market," said an official at another broking house.
Reliance General could survive the sudden downtrend through a merger with another insurance firm. An amalgamation with Royal Sundaram General insurance has been discussed on and off. When contacted, both Reliance General and Royal Sundaram General did not want to comment, but it seems that a merger is very likely.
In April-September 2010, Royal Sundaram General had a smaller market share of 2.58% compared to Reliance General. But its gross premium underwritten increased from Rs438 crore in April-September 2009 to Rs532 crore in April-September this year.
Earlier this month, media reports quoted J Hari Narayan, chairman of the Insurance Regulatory and Development Authority (IRDA), as saying, "The merger of Royal Sundaram Insurance with Reliance General Insurance is expected shortly. The merger will take place soon after the creation of the framework of mergers of general insurance companies. The merger will create a size that will make sense for both parties. Just as in retail, in financial services too, size matters-the bigger you are, the bigger you grow. In a merger, we see that one plus one is more than two."
When asked for the reasons for the falling market share, an official of Reliance Capital corporate communications promised to get a response from the business group. We have not heard from them so far.