India's economy and insurance market: growing rapidly, but mind the risk hotspots
India is on track to become the world's third largest economy by the end of this decade.
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We expect India’s economy to grow rapidly, surpassing Germany and Japan by the end of this decade. We forecast average real GDP growth of 6.2% annually over the next 10 years to 2034 (10% in nominal terms). For this year and next, we estimate average annual real GDP growth of 6.9%, up from 6.5% in 2024, and higher than the annual average of 5.8% over the previous 10 years. Domestic consumption, private investment and economic reforms will underpin the strong growth.
Growing exposures
Economic growth is generating rising disposable incomes and expansions, both of which will support expansion of the country’s insurance sector. We expect growing financial and risk awareness to boost insurance demand, while an evolving regulatory landscape and progress on digital ecosystems will strengthen industry product innovation and distribution.
Life is the mainstay of India’s insurance market, accounting for 74% of total premium volumes. We estimate that life premiums will grow by 4.8% in 2024 in real terms and by 5% in 2025 (2025‒29: 6.9%). Currently almost 90% of premiums are for investment products, which we expect to grow by 5.1% in real terms this year.
On the non-life side, we estimate that premium growth remain stable at 5.7% in 2024 and pick up to 7.3% in 2025. Rising risk awareness, alongside robust economic growth, and regulatory initiatives in support of digitalisation will also lend support. Health and motor insurance are the largest lines of non-life business in India. Prospects for agricultural insurance have improved with changes introduced to the government’s crop insurance scheme in 2023, leading to higher insurance penetration.
Risk hotspots
India’s economy has been growing faster than actions taken to reduce vulnerabilities to natural catastrophe risks. Some regions of Gujarat, Maharashtra, Tamil Nadu, and Delhi have high concentrations of industrial clusters, logistics infrastructure, renewable energy and other assets. Some of these regions are also highly exposed to flooding. cyclones and earthquakes, making them potential catastrophe “risk hotspots.” Any natural disasters in such hotspots can lead to significant loss of life, property, and business interruption losses, and also disrupt broader supply chains.
Re/insurers are and should be more so an important part of both ex-ante and ex-post resilience building activities.