The rating agency Icra on Monday said that it expects the industry’s gross direct premium income (GDPI) to exceed Rs 3.0 trillion by FY2025, up from Rs 2.4 trillion in FY2023.
The rating agency stated that private insurers’ combined ratio is likely to improve and RoE is expected at 11.2-12.8 per cent in FY2024 and 12.5-13.9 per cent in FY2025.
Most PSU insurers are expected to witness a high combined ratio resulting in net losses, though it will be lower compared to the last few years.
Moreover, the capital requirement of three PSU general insurers (excluding new India) is estimated at a sizeable Rs 172 to 175 billion to meet a solvency of 1.50x as of March 2024, assuming 100 per cent forbearance on FVCA.
Neha Parikh, Vice President and Sector Head, Financial Sector Ratings, Icra said, “Icra expects the GDPI to expand by a healthy 13-15 per cent to Rs. 2.73-2.78 trillion by FY2024 and further by 12-14 per cent to Rs 3.06-3.17 trillion by FY2025.”
Parikh stated that driven by the improving distribution network and better financial profile, the market share of private insurers is expected to expand further to 70 per cent of the GDPI in FY2025 from 66 per cent in FY2023 and 50 per cent in FY2017.
The industry’s GDPI grew a sharp 17.2 per cent year-on-year (YoY) in FY2023 to Rs 2.4 trillion with the resumption of economic activity after the waning of Covid-19 infections.
“In absolute terms, the incremental growth in the GDPI was at an all-time high of Rs. 350 billion in FY2023 (higher than Rs 200 billion in FY2022 and Rs 70 billion in FY2021),” it added.
The health segment witnessed the sharpest growth, accounting for 48 to 50 per cent of the incremental GDPI in FY2023, driven by rising awareness regarding health insurance.
The motor segment, which was subdued due to the pandemic-related lockdowns, also picked up pace.
The net claims ratio improved with the normalisation of health claims, partially offset by higher claims in the motor segment with the increased vehicle movement, post pandemic.
Although the claims ratio improved, the underwriting losses of public sector undertaking (PSU) insurers increased because of wage revision and payment of associated arrears, the rating agency mentioned.
Icra expects the combined ratio of PSU insurers to remain weak at 125 to 127 per cent in FY2024 though better than 133 to 134 per cent (estimate) in FY2023 while selecting private players in Icra’s sample set are expected to report a combined ratio of 105 to 106 per cent in FY2024 (106 to 107 per cent in FY2023E).
