Health, life covers to drive insurance growth: Moody’s

Health and life protection cover is expected to help insurers survive in this COVID-led downturn in the economy. But solvency concerns will push insurance forms to raise more capital according to global ratings firm Moodys.

Increased awareness among consumers has led to an increase in sales of health and protection policies, which Moody’s expects will drive further growth in the future.

Currently insurance penetration in India is way below global average levels. While Life insurance penetration at 3.6 per cent of the GDP compared to the global average of 7.13 per cent, in case of general insurance it is 0.94 per cent of GDP, as against the world average of 2.88 per cent.

The economic slowdown has had an adverse impact on Indian insurers, with general insurance growth slowing to 2.5% and life insurers’ new business premiums falling by 1.7% in the nine months to December 2020. But Indian insurers have been developing appropriate products and improving their digital offerings in response to the pandemic and the restrictions the nation-wide pandemic created to the general public following the regulator's direction to offer policies that protect consumers against the coronavirus outbreak. This has led to an increase in sales of health and protection policies, which Moody’s expects will drive further growth in the future.

Health premiums rose 13.7% in the nine months to December 2020, because of rising consumer awareness of these products during the coronavirus pandemic and regulatory actions that enabled insurers to offer protection against the virus. “We expect general insurance premium growth to remain in positive territory thanks to persistently strong demand for health and protection coverage,” says Mohammed Ali Londe, a Moody’s Vice President and Senior Analyst.

At the same time, some insurers’ solvency remains inadequate, prompting government plans to inject capital into three government-owned insurers. In the private sector, solvency concerns are driving M&A, while other players are planning public listings to raise capital.

Some Indian insurers’ solvency remains inadequate due to weak profitability, resulting from the intense competition in the market. The general insurance sector's profitability has been under particular pressure, with a combined ratio- ration of losses and expenses to the premium income of 117.6% for FY 2019 from 117.7% in FY 2018. While positive investment results have previously helped compensate for a weak underwriting performance, falling yields have reduced this source of support.

The Indian government in July 2020 halted a planned merger between state-owned insurers National Insurance Co. Ltd. The Oriental Insurance Co. Ltd. and United India Insurance Co. Ltd. and instead approved a capital injection totaling Rs 12450 crore ($1.65 billion) designed to help improve their profitability.