Further growth anticipated for India’s insurance market: A.M. Best

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Further growth anticipated for India’s insurance market: A.M. Best

Total insurance premiums increase, but several challenges remain.

January 16, 2012

Further growth is anticipated for India’s insurance market, although achieving profitability continues to remain a struggle for many insurers, according to a new report by A.M. Best. Since the market was liberalised in 2000, total insurance premiums have increased strongly, driven primarily by the life market. Continued economic growth, an expanding middle class and heightened demand for health insurance are resulting in foreign insurers and reinsurers seeking to establish a greater presence in the country. However, while the insurance sector offers prospects for growth, it is also characterised by challenges and frustrations.

A.M. Best notes:

• In the long term, India’s middle class is continuing to benefit from increased wealth, although a slowdown in the growth of gross domestic product and inflationary pressures could dampen the insurance market’s rate of growth.

• While the insurance market is expected to continue expanding, it has been characterised by intense competition and losses emanating from the motor pool. Insurers are hopeful that the dismantling of the third-party motor pool in March 2012 will lead to an improvement in rates.

• Despite these varied challenges, opportunities emerging in the world’s second most populated country continue to attract international insurers and reinsurers. However, they face repeated frustrations in attempting to increase their involvement in India, with a lifting of the foreign direct investment limit from 26% to 49% unlikely to occur in the near term.

To download the full A.M. Best report, click here.