Moody’s Ratings, the credit rating agency, expects India’s insurance industry to benefit from sustained premium growth over the medium term, supporting an improvement in profitability.
In Moody’s view, this growth is being driven by strong economic expansion, rising household incomes, accelerating digital adoption, supportive tax measures and the government’s intention to reform the dominant state-owned insurance sector. While these factors are credit positive, Moody’s notes that rapid business growth and regulatory change are likely to place some pressure on capital adequacy, particularly among private insurers.
According to Moody’s Ratings, India’s robust macroeconomic environment is a key driver of insurance demand. The agency expects the Indian economy to expand by around 7.3% in FY 2025, compared with 6.5% in the previous year, lifting per capita incomes and increasing awareness of financial protection.
Moody’s highlights that total insurance premiums rose by 17% in the first eight months of FY 2025, a sharp acceleration from the 7% growth recorded in FY 2024. Life insurance new business premiums and health insurance premiums have been particularly strong, reflecting both rising demand and greater product accessibility.
Moody’s Ratings attributes part of this momentum to the steady digital transformation of the Indian insurance market. Increased use of digital platforms has made insurance distribution more efficient and widened access for consumers, aligning with the regulator’s long-term objective of universal insurance coverage. Moody’s believes that continued digital adoption will remain a structural support for premium expansion across life, health and general insurance segments.
Despite this growth, Moody’s notes that insurance penetration in India remains relatively low. Premiums accounted for only 3.7% of GDP in FY 2024, well below levels seen in developed markets such as the UK and the US. Moody’s considers this gap as evidence of significant long-term growth potential for the sector.
Moody’s Ratings also points to planned reforms of the state-owned insurance sector as an important factor shaping market dynamics. The Indian government has outlined measures including recapitalisation, consolidation and possible privatisation of state insurers, conditional on improvements in underwriting performance. Moody’s views these initiatives as credit positive because large state-owned insurers exert substantial influence over pricing in the market. Historically, these entities prioritised market share over profitability, contributing to weak pricing discipline across the industry.
While Moody’s observes some moderation in underwriting losses among state-owned non-life insurers in FY 2024, it cautions that progress has been gradual and that previous reform efforts have faced operational and legislative delays. As a result, the timing and scale of tangible benefits from these measures remain uncertain. Moody’s believes that even incremental improvements in underwriting discipline among state insurers would ease competitive pressure on private insurers and support healthier pricing across the market.
Improved pricing, in Moody’s assessment, would help insurers manage rising claims costs and strengthen profitability. The agency notes that although the Indian insurance industry generated an after-tax profit in FY 2024, it remained loss-making at the underwriting level due to higher claims in both life and non-life segments. Moody’s expects that a more rational pricing environment, combined with continued premium growth, would gradually improve underwriting results and solvency metrics.
The agency also highlights the positive impact of recent tax changes. The government’s decision in September 2025 to exempt individual life and health insurance policies from goods and services tax is expected to enhance affordability and stimulate demand. Moody’s observes that new individual life and health premiums increased year on year in the months following the exemption and expects this trend to continue, although the benefit to profitability may be partly offset by the loss of input tax credits.
On capitalisation, Moody’s notes that Indian insurers have continued to raise capital to support balance sheet growth. Paid-in capital increased in FY 2024, and Moody’s expects further issuance of equity and subordinated debt, supported by regulatory encouragement for insurers to list on public markets. The recent increase in the foreign ownership limit for insurance companies to 100%, from 74%, is viewed by Moody’s as a significant positive development that should enhance financial flexibility and attract long-term global investors.
Th agency sees growing foreign participation as supportive of stronger governance standards, improved risk management and product innovation. At the same time, the agency cautions that evolving regulations, including the shift toward risk-based capital frameworks and the implementation of IND AS 117 accounting standards, will pose operational and financial challenges. While the regulator has extended the implementation timeline to FY 2026, Moody’s expects the transition to require sustained investment in systems and expertise.
Overall, Moody’s Ratings maintains that India’s insurance sector is well positioned for growth, underpinned by favourable economic conditions, structural reforms and rising insurance awareness. While capital and regulatory pressures will persist, Moody’s believes that sustained premium expansion and gradual improvements in pricing discipline should support a stronger profitability profile over time.
