India insurance sector growth pegged at 7.1% in 2024-28: Swiss Re

India’s insurance sector is projected to record the fastest growth among the G20 countries with the total premium expected to rise at an average rate of 7.1 per cent in real terms during 2024-28. In comparison, the growth rate for the global insurance market will be around 2.4 per cent, said a report by Swiss Re Institute.

The expanding economy, growing middle class, innovation and regulatory support are driving the insurance market growth in India.

In the time period, the life insurance business is expected to record 6.7 per cent growth backed by rising demand for term life cover by the middle-income group and increased adoption of insurtech. Meanwhile, the non-life segment is estimated to grow by 8.3 per cent owing to economic growth, improvement in distribution channels, government support and a favourable regulatory environment with health premiums forecasted to rise by 9.7 per cent.

India’s economic outlook also remains positive with average annual real gross domestic product (GDP) growth estimated to be 6.4 per cent between 2024 and 2028.

“Our medium-term outlook remains positive, with average annual real GDP growth projected at 6.4% between 2024 and 2028. That puts growth in India ahead of major emerging Asia economies such as China (4.3 per cent) and Indonesia (4.9 per cent), emerging Asia excluding China (5.6 per cent), and also emerging markets overall (3.7 per cent),” the research noted.

Meanwhile, for the 2023-24 financial year, the growth in life insurance is estimated to have slowed down to 4.1 per cent from 5.9 per cent in 2022-23 due to a decline in risk awareness as the pandemic faded and after recent changes in tax norms for high-ticket policies. Further, the non-life insurance industry is likely to dip to 7.7 per cent from 9 per cent due to high interest rates, elevated retail and medical inflation.

According to Swiss Re, the overall insurance penetration in 2023-24 is expected to be at 3.8 per cent in India and 6.5 per cent globally. Penetration for life insurance in India for the year is projected to be at 2.9 per cent, and for non-life at 1 per cent.

However, along with an expanding economy and insurance market, India also has an increase in exposure to natural catastrophes and the protection against these is very low. According to the analysis by Swiss Re, 93 per cent of the exposures are uninsured and the major challenge faced in bridging the protection gap is limited awareness and perception of risks.

“Economic losses due to natural disasters have been on an upward trend for many years, driven mainly by economic growth and rapid urbanisation. India’s major cities have high population and asset-value concentrations, and many are exposed to multiple natural hazards. One challenge in bridging the large protection gap is limited awareness and perception of the risks. The industry also faces challenges in underwriting, with a need for more granular data on existing natural catastrophe exposures, and establishing more robust modelling capabilities,” the research noted.

The “Insurance for All by 2047” initiative, launched by the Insurance Regulatory and Development Authority of India in November 2022, along with robust economic growth is expected to support the development and expansion of the insurance sector.