General insurance industry banking on auto sales in festive season to boost growth

Tuesday 10 September 2013, 12:25 PM by

The Indian auto industry is currently facing its worst possible slowdown in the past few decades and more and more strategies are being devised by car makers to counter this crisis. Owing to the same, prominent figures from the industry have requested the government to intervene and support auto manufacturing companies in India. With the festive season approaching soon, car makers are hoping for some sort of revival in their sales. According to reports, even the general insurance industry is expecting a lot from the Indian auto industry. Sources from the industry say that the sales figures of cars in the country are likely to increase in the second half of the current financial year. The general insurance industry is hoping to revive its growth by riding on increased automobile sales.

K Sanath Kumar, the General Manager and Wholetime Director at New India Assurance, spoke about the prospects of the upcoming festive season and its potential. "We hope that auto sales will see a demand revival in the second half of the current fiscal due to festivities. This should support growth of the industry," he was quoted as saying in a recent interview.

It is a known fact that the Indian economy is going through a terrible crisis, which has led to problems in almost all industries. The automobile sector is among the worst hit as the financial fiasco has added on to the already slow demand. In the first quarter of the current fiscal year, the growth in the economy has been around 4.4 per cent, which has badly affected the Indian car market, leading to a significant drop in sales. Due to the fall in sales of automobiles, the general insurance industry has suffered to a great extent. According to statistical reports, around 45 per cent of the business done by insurance firms comes from automobiles.

The auto industry, on the other hand, has been going through a low phase for about a year now. Statistics revealed by Society of Indian Automobile Manufacturers (SIAM) suggested that in the month of July, sales in the auto market declined by around 7.5 per cent. The month of August saw a slight level of improvement in the figures of companies like Maruti Suzuki, Hyundai and Honda. However, industry experts claim these reports and numbers might be misleading and the future seems quite bleak. Car makers have tried number of methods to cope up with the downfall in the market, such as discounts, lucrative deals and launching of new models.

Sources close to the insurance industry have claimed that it is absolutely critical for automobile sales to grow in order to boost the prospects of insurance firms. According to an official from an insurance firm, in case the auto sales show any sort of improvement, the loss ratios are going to rise in the coming time. However, the official was pretty positive about the situation changing in the second half of the current financial year. Notably, analysts from the insurance industry have claimed that the growth has fallen from 18 per cent to 12 per cent from the previous financial year and current fiscal, respectively. On this, Amarnath Ananthanarayanan, Chief Executive Officer at Bharti Axa General Insurance, said, "We have not seen growth uptick as of now, but we hope that the second half will be better."