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Slowing economic growth could impact insurance premiums over the next few years, though recent regulatory measures would counteract some of it, according to a new report by Moody’s Investors Service.
“We expect Indian (re)insurers’ topline to grow at a slower pace in the next two to three years due to more moderate economic expansion and weaker job creation, although the country’s low rate of insurance penetration suggests there is ample scope for further growth. Supportive measures put in place by the Insurance Regulatory and Development Authority of India (IRDAI) will help counterbalance the deteriorating economic environment,” the report said.
India’s GDP growth is expected to slow down to 4.9 per cent in the current fiscal before partially recovering to 6.3 per cent in 2020-21.
“India’s GDP growth weakened to its slowest rate in five years in the fiscal year ended March 2019, and the resultant financial pressure on rural households amid weaker job creation is in turn also weighing on premium growth,” said Benjamin Serra, a Moody’s Senior Vice President.
However, the country’s low insurance penetration rates at just 3.7 per cent in 2018 indicate that there is still ample room for growth, it noted, adding that health premiums, in particular, are likely to increase as a result of the Ayushman Bharat scheme.
“We expect demand for insurance to increase as India’s middle class expands, and as the industry upgrades its distribution channels and makes better use of technology,” the report said.
Recent moves by the IRDAI such as removing the limit on foreign ownership stakes in Indian insurance intermediaries, which will strengthen distribution capabilities, and plans to introduce a new risk-based capital (RBC) system will also support growth in the industry as well as measures for consumer protection.
Total insurance premiums in the country grew by 11.3 per cent in 2018-19, down slightly from 11.5 per cent in the previous fiscal. Of this, general insurance (including health), which accounted for 25 per cent of total premiums, grew by 12.5 per cent during the year.
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