Strong premium growth to lift profitability of Indian insurers: Moody’s

Moody's report on insurance premiums

• India's insurance premiums rose 17 percent in FY25, driven by broad-based growth
• State-owned insurer reforms crucial for better pricing discipline and profitability
• GST exemption aids new business, but input tax credit loss may offset gains.

Did our AI summary help?

India’s insurance industry is expected to see strong premium growth continue over the medium term, helping offset weak underwriting performance and rising claims, as insurers face capital pressures from faster business expansion and regulatory changes, according to a report by Moody's.

Moody’s expects India’s economy to grow by 7.3 percent in FY26, up from 6.5 percent in FY25, supporting higher household incomes and demand for insurance products. Reflecting this trend, total insurance premiums rose 17 percent in the first eight months of FY25 to Rs 10.9 trillion, sharply accelerating from the 7 percent growth recorded in FY24.

Growth has been broad-based.

Life insurance new business premiums rose 20 percent, while health insurance premiums increased 14 percent during the period, highlighting rising risk awareness among consumers.

Moody’s noted that insurers’ increasing reliance on digital channels has significantly improved access and distribution, aligning with the regulator’s long-term goal of “Insurance for All” by 2047.

Despite the rapid growth, insurance penetration remains low. Premiums accounted for just 3.7 percent of GDP in FY24, compared with 11.8 percent in the UK and 12.1 percent in the US, indicating significant headroom for expansion in the Indian market.

State-owned sector reform key to pricing discipline

A major constraint on profitability has been weak pricing discipline, largely driven by the dominance of state-owned insurers. According to Moody’s, public sector insurers have historically prioritised market share over underwriting profitability, exerting downward pressure on premiums across the industry.

The government’s ongoing efforts to reform the state-owned insurance sector, including recapitalisation, potential mergers, privatisation and the earlier minority stake sale in LIC, are seen as credit positive. Moody’s said improved underwriting discipline among public insurers would help support pricing across the market.

However, the agency cautioned that the timing of these reforms remains uncertain, as similar initiatives have faced operational and legislative delays in the past. State-owned non-life insurers still accounted for 61 percent of the sector’s underwriting losses in FY24, even though their share of total premiums has fallen to 31 percent, from over 40 percent before FY20.

Claims pressure weighs on underwriting results

While the industry reported an after-tax profit of $8.1 billion in FY24, it remained loss-making at the underwriting level, due to rising claims in both life and non-life segments. Claims increased 6.4 percent in life insurance and 6.6 percent in non-life insurance during the year, Moody’s said.

The agency noted that any sustained improvement in pricing, particularly if led by reforms in the state-owned sector, would allow insurers to better absorb claims inflation, supporting solvency and profitability over time.

Moody’s also highlighted the positive impact of the government’s decision in September 2025 to exempt individual life and health insurance policies from GST. The move has already led to higher new business volumes, with year-on-year growth in retail life and health premiums accelerating in FY25, supported by improved affordability.

While the tax exemption is expected to lift insurance penetration further, Moody’s cautioned that some of the benefit to insurers may be offset by the loss of input tax credits now that GST is no longer levied .