In a dynamic shift within the insurance sector, the health insurance segment emerged as a powerhouse, driving significant growth in FY2024, reveals a recent report by ICRA. The sector witnessed an impressive expansion, with the health segment alone contributing approximately 50 percent of the incremental Gross Direct Premium Income (GDPI) of around Rs. 375 billion.

According to the ICRA report, FY2024 saw the GDPI surge by 15.5 percent, reaching a noteworthy Rs. 2.79 trillion, largely propelled by the robust performance of the health insurance segment. This remarkable growth trend is expected to persist, fueled by increasing awareness of health insurance and rising ticket sizes.

Despite challenges posed by natural catastrophic events, the sector maintained robust financial performance, with private insurers demonstrating notable improvements in their combined ratio and return on equity (RoE). ICRA forecasts a substantial GDPI growth to Rs. 3.7 trillion by FY2026, marking a remarkable 32 percent rise from FY2024.

Private insurers are poised to sustain their momentum, driving continued strong growth, while public sector insurers may witness moderate growth due to weaker capital positions. The report anticipates enhanced profitability for private insurers, supported by improved underwriting performance and investment income, with RoE projected to reach 13.3 percent in FY2025 and 14.0 percent in FY2026.

Neha Parikh, Vice President and Sector Head – Financial Sector Ratings, ICRA, emphasized, “With higher growth, the market share of private insurers is expected to soar to 69 percent for FY2025 and 71 percent for FY2026, up from 68 percent in FY2024. The health segment, which spearheaded the robust growth, is poised to remain the primary driver, propelled by escalating health insurance awareness and increasing ticket sizes.”

Despite these positive trajectories, PSU insurers confront challenges, with their combined ratio projected to linger at 121 percent in FY2025. Notably, three PSU insurers, excluding New India, necessitate substantial capital injections estimated at Rs. 94-102 billion to meet solvency requirements by March 2025.

In addition to the surge in health insurance, the motor segment also experienced healthy growth, buoyed by increased new vehicle sales, with two-wheelers rising by 13.3 percent YoY and passenger vehicles by 8.4 percent YoY in FY2024.

The ICRA report underscores a transformative landscape within the insurance sector, driven by the ascendancy of health insurance and the continued dominance of private insurers, signaling promising prospects amidst evolving market dynamics.