General insurance poised for 13% growth in FY26 despite under-penetration woes

General insurance companies' growth projection for FY26

India’s general insurance sector, despite a lacklustre FY25 with an estimated growth of 9 percent, is poised for a rebound in FY26, with analysts at India Ratings forecasting a 13 percent growth.

The uptick, closely aligned with an expected nominal GDP growth of 10.5 percent, comes as the industry grapples with under-penetration challenges.

The general insurance (GI) sector remains hampered by low penetration, lingering at sub-1 percent, a figure that trails developed markets and peers such as Thailand, Malaysia, and China, though it outperforms Vietnam and Indonesia, according to the report.

A stark rural-urban divide underscores this challenge, with urban areas driving 80 percent of GI business, while rural regions, housing much of India’s population, account for just 20 percent.

Affordability, tied to the country’s low per capita income and the absence of a robust rural-focussed strategy are key hurdles, the report said.

“Insurers need simple, affordable products and strong distribution networks to break into rural markets,” said Jinay Gala, Director, India Ratings, while presenting the report.

The Insurance Regulatory and Development Authority of India (IRDAI) has introduced the BIMA Trinity, BIMA Sugam, BIMA Vistar, and a women-centric distribution model, to improve penetration through standardised products and a common marketplace.

Yet, the report added, insurers bear the primary responsibility for progress, noting reluctance to invest in high-cost rural expansion amid a focus on quicker profitability.

The report said FY26 growth prospects hinge on a mix of factors. Commercial lines such as crop, liability, marine and fire insurance could see a pickup, fuelled by government-led capex incentives, after a muted FY25.

These segments offer less competition compared to the crowded motor and health spaces, where the top three players hold 30-40 percent market share.

However, the broader trend favours short-term retail products such as health and motor over long-term lines such as engineering and liability, a shift linked to a sluggish infrastructure capex cycle since FY19, the report said.

Another notable trend is the rise of standalone health insurance companies, which are steadily gaining market share at the expense of public-sector insurers.

Public-sector undertakings (PSUs), grappling with capital constraints and internal challenges, have ceded ground to private and specialised health insurers, a pattern analysts expect will persist.

“Standalone health insurers are capitalising on demand, while PSUs struggle to keep pace,” the report said.