India’s insurance industry is poised for substantial growth in FY25, buoyed by strong economic expansion, rising incomes, and greater awareness of health risks. Moody’s forecasts that higher premiums, fueled by government reforms, price hikes, and a burgeoning middle class, will drive this progress. While GDP growth is expected to slow slightly to 7%, GDP per capita is forecasted to rise by 11%, reaching approximately US$ 10,233. Health insurance premiums have already surged by 21% in the first eight months of FY24, showcasing significant momentum in the sector.
Despite challenges such as underwriting losses linked to weak pricing and higher claims, the ongoing reforms are expected to enhance underwriting performance, leading to better profitability. Insurance density in India rose to US$ 95 in FY23, though it remains far below levels seen in developed markets, pointing to substantial growth potential. Private insurers are strengthening their solvency, although capital adequacy issues persist due to regulatory changes and increased underwriting exposure.
Government initiatives, including recapitalization and the sale of a minority stake in Life Insurance Corporation (LIC), are starting to improve the profitability of state-owned insurers. However, the shift to Indian Accounting Standards (IND AS) 117, which mirrors International Financial Reporting Standards (IFRS) 17, presents a challenge for insurers. Despite these hurdles, India’s insurance industry is well-positioned for long-term growth with continued economic development and policy reforms.
