India set for expansion in 2023, premiums to swell in the next 10 years

Despite an upward forecast, the sector still faces an average of $8b annual economic loss from natcat.

India's economy is expected to grow by 6.7% in 2023, driven by private consumption and fixed investment, according to Swiss Re Institute’s (SRI) latest report.

This economic resilience, coupled with an expanding middle class, innovation, and regulatory support, is spurring growth in the Indian insurance market. 

Mahesh H Puttaiah, head of Group Economic & Sigma Research Bangalore at SRI, notes India's progress in the insurance sector and in implementing risk mitigation measures for tropical cyclones, such as early warning systems. 

The Insurance Regulatory and Development Authority of India (IRDAI) aims to provide comprehensive life, health, and property insurance coverage to all citizens by 2047 and has introduced various initiatives and reforms towards this goal.

Over the next five years (2024-2028), total insurance premiums in India are projected to increase by 7.1% in real terms, significantly outpacing the global, emerging, and advanced market averages.

The SRI forecasts that total premiums will more than double, adjusted for inflation, over the next decade (2024-2034), with insurance penetration rising from the current 3.8% to 4.5% by 2034.

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The life insurance segment, accounting for about three-quarters of total premiums, is expected to grow at an annual average of 6.7% during 2024-2028. Non-life premiums, including health, are projected to expand by an average of 8.3% annually.

Despite these positive trends, India faces significant natural catastrophe risks, with an average annual economic loss of $8b (inflation-adjusted) over the past decade (2013-2022). 

However, 93% of these exposures remain uninsured, indicating a substantial protection gap. Challenges in closing this gap include climate change impacts, low-risk awareness, inadequate risk assessment for public infrastructure projects, and underwriting hurdles.

Effective management of these risks requires not only insurance solutions but also physical risk mitigation measures.

“But there is a long way to go on this front for other hazards (eg, floods). The insurance industry has solutions to help individuals and companies 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." Puttaiah added.