The rating agency Icra expects the general insurance industry’s gross direct premium income (GDPI) to touch Rs. 3.7 trillion by FY2026, a robust 32 per cent rise from Rs 2.8 trillion in FY2024. While the growth for private insurers’ is expected to remain strong, that of PSU insurers is likely to remain moderate because of the weak capital position.
The profitability for private insurers is likely to improve supported by better underwriting performance. Though expected to be lower, the combined ratio1 for PSU insurers will remain weak, thereby impacting the net profitability. Moreover, the capital requirement of three PSU general insurers is estimated at a sizeable Rs 94-102 billion to meet solvency of 1.50 times as of March 2025, assuming 100 per cent forbearance on Fair Value Change Account (FVCA).
Neha Parikh, Vice President and Sector Head– Financial Sector Ratings, Icra said, “With higher growth, the market share of private insurers in terms of GDPI is likely to rise to 69 per cent for FY2025 and 71 per cent for FY2026 from 68 per cent for FY2024. The health segment, which witnessed the strongest growth (accounting for 50 per cent of incremental GDPI of Rs 375 billion in FY2024), is likely to remain the key driver with the rising awareness of health insurance and increased ticket sizes.”
The industry’s GDPI saw a robust 15.5 per cent year-on-year (YoY) expansion in FY2024, rising to Rs 2.79 trillion supported by the health segment. Apart from this, the growth in the motor segment was healthy, supported by the increase in new vehicle sales (two-wheelers, or 2W, rose by 13.3 per cent YoY and passenger vehicles, or PVs, by 8.4 per cent YoY in FY2024).
With the high frequency and severity of natural catastrophic (NAT CAT) events in FY2024, the net loss ratio of the fire segment was impacted; however, considering the reinsurance and low retention in this segment, the impact on the overall net loss ratio of the industry was manageable. Profitability for private players remained strong supported by improved investment income, which is likely to continue.
The RoE for select private players in Icra’s sample set companies is expected to improve to 13.3 per cent in FY2025 as the underwriting performance improves (combined ratio of 106 per cent in FY2025 over 107 per cent (estimate) in FY2024).
The PSU insurers posted a small net profit in 9M FY2024 in contrast to the net losses in the previous years, driven by improvement in the combined ratio (supported by the absence of the retrospective wage revision and payment of associated arrears in FY2024) and higher investment income.
The rating agency expects the combined ratio for PSU insurers to remain weak, albeit improving, at 121 per cent in FY2025 (122 per cent (estimate) in FY2024).
