Moody’s has reported a relatively optimistic outlook for the Indian insurance sector given the economic downturn across the country resulting from the COVID-19 pandemic.
The rating agency noted that insurance premium growth’s deceleration has been limited, supported by strong demand for health coverage, favourable regulation and increased digitalisation
Specifically, Moody’s expects general insurance premium growth will remain in positive territory and life premiums will remain broadly flat.
“Although the economic slowdown has had an adverse impact on Indian insurers, with general insurance growth slowing to 2.5% and life insurers’ new business premiums falling by 1.7% in the nine months to December 2020, we expect general insurance premium growth to remain in positive territory thanks to persistently strong demand for health and protection coverage,” said Mohammed Ali Londe, a Moody’s Vice President and Senior Analyst.
Health premiums rose 13.7% in the nine months to December 2020, because of rising consumer awareness of these products during the coronavirus pandemic and regulatory actions that enabled insurers to offer protection against the virus.
Indian insurers have also responded to the crisis by rapidly developing appropriate products and improving their digital offerings.
This has led to an increase in sales of health and protection policies, which Moody’s expects will drive further growth in the future.
Some Indian insurers’ solvency remains inadequate which could prompt government-led capital injections and M&As, although this is viewed as a credit positive for the long term
“Over the long term, these steps will reinforce Indian insurers’ credit strengths, adding transparency and improve their risk management and governance standards,” Londe concluded.