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Informist, Monday, Jan. 19, 2026

 

--Moody's: Expect India's economy to grow 7.3% in FY26 

--Moody's:India insurance industry to benefit from sustained premium growth 

--Moody's: India insurance industry to benefit from robust econ expansion 

--Moody's:India insurance industry to benefit from digitisation, tax changes 

--Moody's: Strong premium growth to boost India insurance cos profitability 

--Moody's: Expect some pressure on India insurance cos capital adequacy 

--Moody's: Strong econ growth to support demand for insurance in India 

--Moody's: Reform of India PSU insurance sector to support prices 

--Moody's: See India insurance cos raising more capital, including via IPOs 

 

NEW DELHI – The Indian insurance industry will benefit from sustained premium growth on the back of robust economic expansion and increased digitisation, Moody's Ratings said Monday. Change in taxation and planned reform of the dominant state-owned insurance sector will also support premium growth, the rating agency said. "The increase should improve the industry's currently weak profitability," it said in a report. 

 

According to the rating agency, the Indian economy is likely to grow 7.3% in 2025-26 (Apr-Mar), which will increase average income and support demand for insurance products. Total premiums were up 17% in the first eight months of FY26, outpacing the 7% expansion achieved in all of FY25. "Indian insurers' digitisation efforts are also contributing to premium growth by making insurance more accessible to consumers," Moody's said. This is in line with the Indian insurance regulator's objective of 'Insurance for All' by 2047.

 

The insurance industry's robust premium increases should support its underwriting profitability, which has been weak because of subdued prices and rising claims, according to the rating agency. Despite the increase in insurance penetration, it is still "far below" developed markets, indicating the Indian insurance sector "still has ample growth potential", Moody's said. 

 

The report also said that the Goods and Services Tax exemption to individual life and health policies would positively impact the sector by making insurance products more affordable, boosting their demand, and improving penetration. New individual life and health premiums grew 9% and 14% on year, respectively, during the first eight months of FY26. "We expect this to continue as affordability improves, although the positive impact on insurer profitability will be partly offset by a loss of income tax credit now that GST is no longer levied," Moody's said.

 

It also said that the Indian government's support to the insurance industry, with the aim of increasing profitability, would significantly influence market pricing. The government had sold minority stake in Life Insurance Corp. of India and proposed to recapitalise some state-owned companies provided they improve their underwriting performance. Other proposed measures include the potential merger or privatisation of state-owned insurers. "We see these measures as credit positive," the rating agency said.

 

However, India's large state-owned insurers have historically prioritised gaining market share over underwriting profitability. "As a result, they have tended to set prices at artificially low levels, making it difficult for private sector peers to compete." Moody's also said it was "unclear" when the reform initiative, previously delayed by operational and legislative obstacles, would yield more substantial results. 

 

The government had announced in the Budget for FY19 that National Insurance Co., United India Assurance Co., and Oriental India Insurance Co. would be merged into a single entity and would be listed. However, in the Budget for FY22, the government said it would privatise one general insurance company during the year. Notwithstanding these Budget announcements, there has been little movement on the stake sale due to the weak financial performance of the companies.

 

If PSU insurers sustainably improve their underwriting, pricing pressures will go down for the entire sector, the report said. "This would allow private insurers to price more sustainably, helping them absorb a rising claims burden and improving their solvency and profitability," it said. In FY25, the Indian insurance industry cumulatively made a profit of over INR 736 billion, but remained loss-making at the underwriting level, with claims up 6.4% and 6.6% in the life and non-life sectors, respectively. "The market dominance of state-owned insurers has to date made it difficult for the industry to push through compensating price increases."

 

All said, despite the healthy growth prospects, Moody's expects insurer solvency to face some pressure because of continued growth in premium volume and evolving regulatory requirements. It expects further capital raising activity, including via stock market listings and subordinated debt issuance, as the industry continues to expand. 

 

Moody's also views the increased foreign investment limit of 100% in the sector as "credit positive" as it will support product innovation and bring benefits in the areas of capital adequacy, financial flexibility and governance standards. However, evolving regulations, including the introduction of risk-based capital requirements and stricter governance standards, will make it difficult for insurers to build up their capital base, it said. "Limited investor appetite for subordinated debt, reflecting its constrained liquidity and greater credit risk, is a further obstacle," Moody's said.  End

 

Reported by Priyasmita Dutta

Edited by Avishek Dutta

 

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