Indian insurers are expected to see a jump in their premium income during the post-pandemic economic recovery phase driven by health and protection policies, said global credit rating agency Moody's Investors Service.
In its latest report on the Indian insurance sector, Moody's said that the Central government's plans to infuse capital into state-owned insurers, and listing of Life Insurance Corporation of India (LIC) will encourage disciplined underwriting of risks in general and life sectors.
This will pave the way for price increases across the market, further supporting insurers' profitability.
"However operational and legislative obstacles have delayed these plans before which make unclear when the reforms will reach completion, although the LIC listing is on track for completion soon. Rising reinsurance costs due to a global increase in catastrophe events also favor higher insurance prices," Moody's said.
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According to Moody's, the government-owned general insurers accounted for 67 percent of the general insurance market's underwriting losses in FY 2020, while their share of total premiums was just 37 percent.
More positively, state-owned insurers' underwriting losses have actually already started to decline recently, reflecting their closer focus on underwriting performance, it said.
Rising premiums and prices, in turn, will help insurers absorb higher claims, which pushed the average net loss ratio for general insurers to 95 percent in the first three months of fiscal 2021 from 81 percent in the previous year, Moody's said.
In anticipation of profitable growth opportunities, 20 of India's 34 general insurers and four of its 24 life insurers raised capital in fiscal 2020.
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Insurers will continue such transactions in the coming months, which will improve the Indian insurance sector's capital adequacy and financial flexibility, Moody's said.
"The Indian insurance industry's growth prospects are favorable, underpinned by an expected 9.3 percent GDP (gross domestic product) expansion in fiscal 2021, which ends March 2022, and by strong demand for health insurance in the wake of the pandemic," said Mohammed Ali Londe, Moody's Vice President, and Senior Analyst.
Moody's said the total premiums grew nine percent in the first nine months of fiscal 2021, slightly ahead of the 8.6 percent increase in fiscal 2020, with general insurance premiums (including health) up 11 percent and life new business premiums rising seven percent.
Robust premium growth is positive for Indian insurers' profitability, which is currently weak because of persistently low prices and the rising cost of claims, Moody's said.
