Credit rating agency Moody’s Ratings expects the Indian insurance industry to benefit from continued premium growth over the medium term, supporting improved profitability.
Moody’s believes this growth will be driven by strong economic expansion, rising household incomes, accelerated digitalisation, supportive tax measures and the government’s intention to reform the dominant state-owned insurance industry. While these factors are positive for credit, Moody’s noted that rapid business growth and regulatory changes could put some pressure on capital adequacy, particularly for private insurers.
According to Moody’s Ratings, India’s strong macroeconomic environment is a key driver of insurance demand. The agency predicts that the Indian economy will grow by about 7.3% in fiscal 2025, up from 6.5% in the previous year. Per capita income will increase and awareness of financial protection will increase.
Moody’s highlighted that total insurance premiums increased by 17% in the first eight months of fiscal 2025, a sharp acceleration from the 7% growth in fiscal 2024. Life insurance new business premiums and health insurance premiums were particularly strong, reflecting increased demand and improved product accessibility.
Moody’s Ratings attributes part of this momentum to the steady digital transformation of India’s insurance market. Increased use of digital platforms makes insurance distribution more efficient and expands coverage for consumers, in line with the regulator’s long-term goal of universal insurance coverage. Moody’s believes that continued digital adoption will continue to provide structural support for premium expansion in life, health and general insurance.
Despite this growth, Moody’s noted that insurance penetration in India remains relatively low. Premiums accounted for only 3.7% of GDP in fiscal year 2024, which is far lower than the levels in developed markets such as the United Kingdom and the United States. Moody’s believes this gap is evidence of the industry’s significant long-term growth potential.
Moody’s Ratings also pointed to planned reforms in the state-owned insurance industry as an important factor affecting market dynamics. The Indian government has outlined measures including recapitalization, mergers and possible privatization of state-owned insurance companies, subject to improved underwriting performance. Moody’s views these moves as credit positive, as large state-owned insurance companies have significant influence on market pricing. Historically, these entities have prioritized market share over profitability, resulting in weak pricing discipline across the industry.
While Moody’s observed a slowdown in underwriting losses at state-owned non-life insurers in fiscal 2024, it warned that progress was incremental and previous reform efforts faced operational and legislative delays. Therefore, the timing and scale of actual benefits from these measures remain uncertain. Moody’s believes that even if state-owned insurance companies gradually improve underwriting discipline, it will ease competitive pressure on private insurance companies and support healthier pricing across the market.
Moody’s assessed that improved pricing would help insurers manage rising claims costs and enhance profitability. The agency noted that although the Indian insurance industry posted a profit after tax in FY24, its underwriting levels remained in the red due to higher claims in both life and non-life segments. Moody’s expects a more reasonable pricing environment, coupled with continued premium growth, to gradually improve underwriting performance and solvency indicators.
The agency also highlighted the positive impact of recent tax changes. The government’s decision in September 2025 to exempt individual life and health insurance policies from goods and services tax is expected to improve affordability and stimulate demand. Moody’s observed that new individual life and health premiums increased year-on-year in the months following the exemption and expects this trend to continue, although profitability benefits may be partially offset by the loss of input tax credits.
On the capitalization front, Moody’s noted that Indian insurance companies continue to raise capital to support balance sheet growth. Paid-up capital has increased in fiscal 2024, and Moody’s expects further equity and subordinated debt issuance, supported by regulatory incentives to encourage public market listings of insurers. Moody’s views the recent increase in the insurance company’s foreign ownership ratio from 74% to 100% as a significant positive development that will enhance financial flexibility and attract long-term global investors.
The agency believes that increasing foreign participation will help strengthen governance standards, improve risk management and product innovation. At the same time, the agency warned that changing regulations, including the shift to a risk-based capital framework and the implementation of IND AS 117 accounting standards, will create operational and financial challenges. Although regulators have extended the implementation timeline until fiscal 2026, Moody’s expects the transition to require continued investment in systems and expertise.
Overall, Moody’s Ratings believes that the Indian insurance industry is in a good growth position, supported by favorable economic conditions, structural reforms and rising insurance awareness. While capital and regulatory pressures will persist, Moody’s believes continued premium expansion and gradual improvements in pricing discipline should support stronger profitability over time.