Slowdown to affect insurance sector in India: Moody's

New Delhi, Jan 22 (IANS): The slowing Indian economy will weigh on insurance premium growth over the next two-three years, Moody's Investor Service said on Tuesday but added that supportive measure taken by regulator IRDAI will help counterbalance the deteriorating economic environment.

"India's GDP (gross domestic product) growth weakened to its slowest rate in five years in the fiscal year ending March 2019, and the resultant financial pressure on rural households amid weaker job creation is in turn also weighing on premium growth," said Moody's Senior Vice President Benjamin Serra.

According to the latest estimates by the Indian Statistics Department, the economy will grow at 5 per cent in the current fiscal ending in March, slower than the 6.8 per cent growth recorded in 2018-19. GDP growth fell to a six-and-a-half-year low in the quarter ended September.


However, low insurance penetration rates in India also suggest there is still ample room for growth. According to Moody's, health premiums are likely to increase due to the government's Ayushman Bharat scheme that was launched in September 2018.

Billed as the world's largest health assurance scheme, Ayushman Bharat aims to provide free health insurance of Rs 5 lakh per family to nearly 40 per cent of the population --more than 100 million poor and vulnerable families each year.

"Nevertheless, the country's low insurance penetration rate suggests ample room for further growth, while supportive government and regulatory initiatives are also helping mitigate the currently challenging environment for Indian insurance and reinsurance companies," Serra said.

Moody's further said that the insurance regulator has taken series of measures, which includes removing the limit on foreign ownership stakes in Indian insurance intermediaries. The step, announced in the Union Budget in July 2019, is aimed at bringing in global products, practices, and sales strategies to India's insurance sector.

"IRDAI also plans to introduce a new risk-based capital (RBC) regime with similar principles to Solvency II in Europe. This is likely to improve Indian insurers' risk management, a credit positive. While many of the large private insurers have already adopted a risk-based approach to managing capital, we expect the new system will pose some implementation hurdles, particularly for smaller insurers," Moody's said.

This could encourage market consolidation, further enhancing the competitive advantage of larger players, it added.


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Comment on this article

  • Krishna Dasa, Udupi,.

    Wed, Jan 22 2020

    Foreign ownership stake holders in Indian insurance business will sell the ownership stake and take away the investment funds overseas and it will make Indian Rupees much cheeper. Indian stake holders will sell the stake or mortgage it to Government Banks and the proceeds will be moved overseas for safety and to prevent taxation.

    DisAgree Agree [1] Reply Report Abuse

  • Flavian, Mangaluru/Kuwait

    Wed, Jan 22 2020

    They are not interested in people's well being nor countries falling economy & unemployment
    Their only motto is how to bring Saffron party through out India. Since 6 years they are chasing
    opposite party members through IT raids, digging some past stories again & again. Now pre-occupied with some assembly elections and NRC, NRP & CAA implementations. As per IMF, China's GDP is going on positive trend, where India GDP is in negative trend. Same trend on inflation rate.
    Even Vietnam's GDP/Inflation rate is going in a upward trend by high percentage.

    DisAgree Agree [1] Reply Report Abuse

  • David Pais, Mangalore

    Wed, Jan 22 2020

    hindutva is in full swing & people will eat it. faku daaku bhaktas & nagpur r happy. jai sriram. hAhAhA......

    DisAgree [2] Agree [4] Reply Report Abuse

  • Jossey Saldanha, Mumbai

    Wed, Jan 22 2020

    Only Fekugiri is doing Good ...

    DisAgree [2] Agree [2] Reply Report Abuse


Title : Slowdown to affect insurance sector in India: Moody's


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