Though India's insurance market shows potential to be the fastest-growing insurance market in the next five years, the Economic Survey 2024-25 feels these changes are necessary.
Department of Economic Affairs released the Economic Survey 2023-24 which revealed that in the medium term, health premiums are projected to grow by 9.7 per cent annually in 2024-28. It said that India is poised to emerge as one of the fastest-growing insurance markets over the next five years. However, it added that "Prompt and reasonable settlement of insurance claims and a lower rejection rate are necessary to increase insurance penetration."
In recent years, due to the global economic slowdown and inflation, the rising cost of capital and the need for robust investment returns have put pressure on insurers. Reserve adequacy has become a critical consideration, especially during periods of high inflation and the COVID-19 pandemic. Delays in settlements emerge as a more significant problem in periods of high economic and social inflation, the report said.
As a result of these challenges, global insurance markets contracted in 2022. According to the Swiss Re Institute report on World Insurance, total global insurance premiums contracted 1.1 per cent in real terms in 2022 compared to a growth of 3.4 per cent in 2021. The non-life insurance sector saw a 0.5 per cent increase, while the life insurance segment experienced a 3.1 per cent contraction.
Moreover, as per the Economic Survey 2023-24, the insurance sector is expected to face continued challenges in the year ahead, as global economic conditions could influence the performance of the insurance industry shortly. The non-life insurance sector faces headwinds such as economic slowdown, high interest rates, and elevated retail and medical inflation.
Factors such as economic growth, an expanding middle class, innovation, and regulatory support have been driving the growth of the insurance market in India. Although there was a slight moderation in premium growth in FY23, overall insurance penetration and density in India saw positive trends according to the report.
Health accounts for around 35 per cent of sector premiums written in FY23. With an estimated increase of 11 per cent in premiums, health saw the fastest growth amongst all nonlife lines in FY23. Increased health awareness, supportive government policies, rising medical costs and innovations in Insurtech have supported this growth. Although price and income constraints may limit demand for the lower income groups, the expanding middle class and increased discretionary spending are expected to support overall growth, the report said.
Recently, ABPMJAY achieved a milestone of generating 34.2 crore Ayushman cards across India, with 49.3 per cent of them held by females. In the medium term, health premiums are projected to grow by 9.7 per cent annually in 2024-28, the report said.