While Moody’s Investors Service expects India’s slowing economy to hurt insurance premium growth over the next few years, a low 3.7% penetration rate alongside supportive measures put in place by regulators will help counterbalance the deterioration.
Analysts note that GDP growth slowed to 6.8% in fiscal 2018 and could slow further to 4.9% in fiscal 2019 before recovering to 6.3% in fiscal 2020.
The Insurance Regulatory and Development Authority of India (IRDAI) has put in place a series of measures, including the removal of the limit on foreign ownership stakes in Indian insurance intermediaries, which Moody’s says will strengthen distribution capabilities.
Additionally, health premiums in particular are likely to increase as a result of the Ayushman Bharat, or National Health Protection Mission, a government-funded initiative that aims to provide 100 million families with up to $7,000 of health insurance coverage each year.
“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.
“Nevertheless, the country’s low insurance penetration rate suggests ample room for further growth, while supportive government and regulatory initiatives are also helping mitigate the currently challenging environment for Indian insurance and reinsurance companies,” adds Serra.
The IRDAI also plans to introduce a new risk-based capital system with similar principles as the Europe’s Solvency II regime, which Moody’s says should help improve insurers’ risk management, while measures to safeguard customers and encourage innovation should help raise the insurance penetration rate.