Indian Economy News

India's growing middle class to drive insurance industry's growth in FY24, says Moody's

  • IBEF
  • January 21, 2025

India's insurance industry is set for strong growth in FY25, supported by robust economic expansion, rising incomes, and increased awareness of health risks. According to Moody's, the sector will benefit from higher premiums driven by government reforms, price adjustments, and a growing middle class. While Gross Domestic Product (GDP) growth is forecasted at 7%, slightly down from the previous year, GDP per capita is projected to rise 11% YoY to Rs. 8,85,530.88 (US$ 10,233). The health insurance segment has shown remarkable growth, with premiums rising 21% in the first eight months of FY24. Despite challenges like underwriting losses due to weak pricing and rising claims, the reforms are expected to strengthen underwriting performance and bolster overall profitability.

Although the insurance density in India rose to Rs. 8,220.99 (US$ 95) in FY23, it remains significantly below developed markets, highlighting immense growth potential. Private insurers are enhancing their solvency, though capital adequacy pressures persist due to regulatory changes and underwriting exposure. Government reforms, including recapitalization and a minority stake sale in Life Insurance Corporation (LIC), have started improving the profitability of state-owned insurers. Challenges lie ahead, particularly with the transition to Indian Accounting Standards (IND AS) 117, India's equivalent of International Financial Reporting Standards (IFRS) 17. Insurers must adapt to this new framework, but with continued reforms and economic growth, India's insurance sector is well-positioned for sustained progress.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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