AM Best, the credit rating agency, has affirmed a stable outlook for India’s non-life insurance sector, citing strong growth potential fuelled by regulatory initiatives and increasing insurance demand.
Insurance premiums in India’s non-life segment grew at a double-digit rate for the fiscal year ending 31 March 2024 (FY 2024), as detailed in the Best’s Market Segment Report, “Market Segment Outlook: India Non-Life Insurance.”
This growth was driven by strong performance in key business areas, particularly health and motor insurance. Additionally, India’s economy expanded by 8.2% in FY 2024, fuelled by government investments in infrastructure and rising household consumption.
While signs of an economic slowdown have emerged recently, both monetary and fiscal policies are expected to support continued economic growth.
The report also highlights that the Insurance Regulatory and Development Authority of India is making strides toward its goal of “Insurance for all by 2047.” This includes several initiatives designed to accelerate growth and expand coverage in the insurance industry.
The regulator’s “Bima Trinity” approach aims to drive long-term growth and development through “Bima Sugam,” an electronic insurance marketplace; “Bima Vistaar,” a product offering coverage for life, health, personal accident, and property risks; and “Bima Vaahak,” a women-centric distribution channel.
“We expect that India’s non-life premium growth will be bolstered over the medium term by the country’s economic development, rising insurance demand, and regulatory initiatives which are designed to increase insurance penetration and promote financial inclusion,” added Chris Lim, Associate Director, AM Best.
AM Best views recent monetary policy actions in India as favourable for the non-life insurance sector’s investment income in the short term. Non-life insurers in India are expected to benefit from stable domestic interest rates, which have held steady compared to the previous year.
Since February 2023, the Reserve Bank of India has maintained its key policy rate, the repo rate, at 6.5%, after a series of hikes aimed at managing inflationary pressures. As insurers reinvest their assets into higher-yielding fixed-income instruments upon maturity, interest income is expected to remain advantageous.
“The combination of interest rate stability and equity market performance is likely to support solid investment returns in the medium term,” commented Victoria Ohorodnyk, Director, AM Best. “However, maintaining disciplined investment strategies will be essential to mitigating exposure to market shocks.”
Despite robust premium growth, India’s non-life insurance sector continued to report underwriting losses in FY 2024, as noted in the report. This trend is anticipated to continue, driven by intense market competition, inadequate pricing discipline in key business areas, and ongoing issues with claims fraud.
The post AM Best maintains stable outlook on India’s non-life insurance sector amid strong growth appeared first on ReinsuranceNe.ws.