Even though the penetration of health insurance in India is growing at a rather slow pace, with a staggering health protection gap of 73 percent, it has clinched the largest market share at 40 percent, outpacing motor insurance, which stands at 29.3 percent, despite being a legal requirement for all vehicles.
While Third Party (TP) insurance is mandatory, whereas Owner Damage (OD) policies are not, and the mandatory nature of TP insurance at the point of vehicle purchase does not guarantee renewals, especially for OD policies.
"A critical issue for motor insurance is the high percentage of uninsured vehicles because of non-compliance with mandatory insurance laws," said G Srinivasan, Galaxy Health Insurance.
Around 54 percent of vehicles are still uninsured.
He added that vehicle owners often fail to either purchase insurance initially or renew it annually.
Moreover, the sector's growth is closely tied to new vehicle sales, which can been volatile.
For instance, December 2024 saw a dramatic decline in retail vehicle sales by over 45 percent, dropping from 3,208,719 units in November to just 1,756,419, as reported by the Federation of Automobile Dealers Associations (FADA).
This decline was despite aggressive discounting efforts, with a year-on-year decrease of 12.49 percent from December 2023.
January 2025, however, showed a slight recovery with a 6.6 percent increase in sales.
Shashi Kant Dahuja, executive director and chief underwriting officer, Shriram General Insurance, highlighted the pandemic effect. "A major shift came in the mindset of people when a lot of families lost entire life savings while fighting against COVID. The importance of health insurance was finally realised and this gave a rise to health insurance purchase," he said.
Out of the total motor premiums, 60 percent is third party premiums and as there has been no rise in these premiums by the regulator, the growth seems muted, he added.
On the other hand, health insurance's trajectory is supported by the fact that around 75 percent of Indians still pay for medical services out-of-pocket, highlighting the sector's low penetration and growth potential, according to experts.
Moreover, unlike motor insurance, where premiums decrease due to vehicle depreciation, health insurance premiums inflates with age, ensuring a consistent revenue stream from renewals, they added.
Industry leaders, including the CEO of Niva Bupa, have predicted a continued expansion at a rate of 14 percent.
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