Chennai, Jan 28 (.) Credit rating agency CARE Ratings said the medium-term outlook for India’s non-life insurance industry remains stable, supported by regulatory reforms, improving underwriting discipline, and steady economic momentum.
Growth, however, is expected to moderate from recent peaks, partly reflecting a higher base in FY25 and normalisation across select segments.
Accordingly, based on nominal GDP growth trends, historical premium growth patterns, segment-wise outlook, and industry interactions, CareEdge Ratings estimates premiums will grow at 8–11% over the medium term.
Meanwhile, unforeseen market disruptions could weigh on this growth. Health insurance (including personal accident) would continue to remain the largest segment, reaching Rs 1.40 lakh crore by FY27. In comparison, motor insurance is projected to cross Rs 1.06 lakh crore, aided by improving vehicle sales, digitisation, and deeper penetration in tier 2–3 cities.
The recent reductions in Goods and Services Tax (GST) rates on insurance products are likely to further support premium growth across segments by lowering overall policy costs, improving affordability, and stimulating greater retail participation, CARE Ratings said.
Meanwhile the Indian non-life insurance gross domestic premium grew from Rs 1.69 lakh crore in FY19 to Rs 3.07 lakh crore in FY25, registering a healthy Compound annual growth rate (CAGR) of 10.4%, broadly tracking nominal Gross Domestic Product (GDP) growth, which rose by 9.8% over the same period, said credit rating agency CARE Ratings in a report.
In FY25, growth moderated to 6.2% from 12.8% in FY24 due to the implementation of the 1/n rule (recognition of the premium daily) weak crop performance, and slower commercial activity, while health insurance remained a key growth driver.
The change in premium recognition under the 1/n framework, led to an estimated about 2–3% moderation in reported industry growth in FY25, a trend consistently visible across leading insurers, as reflected in deferred gross written premiums (GWP).
According to CARE Ratings, the loss ratio across segments is expected to remain broadly aligned with historical trends. In contrast, the overall loss ratio for FY26 is projected to decline slightly to around 78–82% as underwriting practices and price discipline improve.
Expense of Management (EoM) rose in absolute terms by FY25, but efficiency improved materially, with opex as a percentage of Net Earned Premium (NEP) declining from 27.0% in FY19 to 16.6% in FY25.
The distribution costs have risen structurally, as the net commission ratio for the industry increased to 24.9% in
FY25 from a historical range of 5.0-12.0%, driven by a shift towards the 1/n rule, higher agent payouts, higher retail focus and reduced reinsurance commissions.
On the other hand, the underwriting losses widened to Rs 0.30 lakh crore in FY25, up 6.0% y-o-y from Rs 0.28 lakh crore in FY24 and significantly higher than Rs 0.16 lakh crore in FY19, indicating persistent pressure on core underwriting profitability.
Public sector insurers continued to account for the majority share, with Rs 0.18 crore, while private insurers reported losses of Rs 0.12 crore. Consequently, the combined ratio has consistently stayed above 100%.
. VJ MI .
