Swiss Re forecasts non-life premium growth of 8.3% in India by 2028

Total insurance premiums in India are forecast to grow by 7.1 percent in real terms over the next four years, above the global, emerging and advanced market averages, Swiss Re Institute has predicted.

  • Non-life premiums (including health) expected to grow by an average of 8.3% in the medium term
  • Agriculture premiums to pick up in 2024 following flat growth in 2023
  • 93% nat cat protection gap exacerbated by underwriting challenges and lack of data
  • Need for physical risk mitigation measures to complement (re)insurance solutions

In a new report, Swiss Re Institute noted that the life market segment accounts for around three quarters of total insurance premiums in India, and is forecast to grow at an annual average of 6.7 percent by 2028.

Non-life premiums (including health as the largest non-life line of business) are expected to expand by an average of 8.3 percent in the medium term, driven by increased demand, strong distribution channels and growing industry adoption of insurtech.

Swiss Re Institute added that growth in almost all non-life lines of business slowed last year as the industry continued to stabilise after the pandemic.

Motor is the second-largest line of business in non-life, with nearly 32 percent market share. There has been a recovery in automobile sales since Q1 2023, and this trend is expected to continue over the medium to long term due to rising per-capita incomes and low vehicle penetration.

In agricultural insurance, the third-largest non-life line of business, Swiss Re Institute estimates flat growth in 2023 due to a 32 percent decline in premium rates in the Kharif cropping season from June to September.

The report also predicted that agriculture premiums will begin rising from 2024 onwards, forecasting 2.5 percent real premium growth on average annually over the medium term, supported by improvements in insurance infrastructure such as mobile applications and remote sensing for crop loss monitoring.

In the long term, Swiss Re Institute forecast that total premiums will more than double in real terms over the next decade, with insurance penetration increasing from 3.8 percent currently to 4.5 percent in 2034.

This growth will be supported by estimations that India’s economy will grow by 6.7 percent in 2024, underpinned by private consumption, fixed investment, an expanding middle class and regulatory support.

For the latter, the Insurance Regulatory and Development Authority of India (IRDAI) is targeting “appropriate life, health and property insurance cover” for all citizens by 2047.

Closing the nat cat protection gap

India is exposed to many natural catastrophes, including earthquakes, floods, tropical cyclones, drought and wildfires, with its major cities exposed through high population density and asset-value concentrations. The country saw an average annual economic loss of $8bn (inflation-adjusted) in the decade between 2013 and 2022.

However, insurance protection against natural catastrophe risks is low, with Swiss Re Institute's resilience analysis indicating that 93 percent of these exposures in India are uninsured.

Factors complicating the closing of this gap include climate change effects, lack of awareness and low perception of risk, poor risk assessment for public sector infrastructure projects, and underwriting challenges.

In underwriting, particular issues include paucity of granular data on existing natural catastrophe exposure and difficulties establishing more robust modelling capabilities.

While insurance can help cushion the financial losses, the report added that it is necessary to have physical risk mitigation structures in place in the first place, such as early warning systems for tropical cyclones.

Mahesh Puttaiah, head of group economic and sigma research for Bangalore at Swiss Re Institute, commented: “India has made strong progress in developing the insurance sector and there remains significant potential for growth given the country's low insurance penetration.

“India has also made good progress on risk mitigation measures for tropical cyclones, but there is a long way to go on this front for other hazards. The insurance industry has solutions to help individuals and companies to manage financial losses that result from natural catastrophes, while at the state level, (re)insurance solutions can support governments in relief and rehabilitation work, in reinstating crucial services, and in the rebuilding of public infrastructure.”