Sluggish expansion expected in India's insurance industry, attributable to subdued auto sales and sluggish corporate health renewals, according to a recent analysis.
The Indian insurance industry is currently experiencing a slowdown, with growth rates moderating across various segments. According to recent reports, the overall GDPI growth remained sluggish in June 2025, reflecting a complex interplay of economic, regulatory, and technological factors.
One of the key contributors to this slowdown is the decline in insurance penetration. As of FY24, insurance penetration in India has dropped below 4%, with life insurance penetration falling to 2.7% and non-life at 1%. This reduced demand for insurance products, including motor and corporate policies, has had a significant impact on the industry's growth.
Global economic uncertainty also plays a role in the slowdown. The impact on India's manufacturing and export sectors can affect corporate policy renewals, as sectors like textiles and pharmaceuticals face sluggish demand and logistical barriers.
Domestic economic indicators, such as the recent slowdown in India's Industrial Production (IIP) growth, also contribute to the challenges facing the insurance industry. With IIP growth at 1.23% in May 2025, broader economic challenges are reflected, potentially reducing consumer and corporate spending on insurance.
Economic and inflationary pressures are another factor. The global economic slowdown and elevated input costs due to unresolved trade issues may lead to claims inflation and subdued investment returns for insurers, necessitating tighter reserving and premium recalibration.
Regulatory and technological changes also pose challenges. Initiatives like the National Health Claims Exchange (NHCX) and the Bima Sugam platform aim to enhance digital rails for insurance innovation. However, these changes might initially disrupt traditional renewal processes as companies adapt to new technologies and regulations.
In the motor segment, the growth has slowed down. The Gross Direct Premium Income (GDPI) in the motor segment rose by 6.7% YoY in June 2025. Within the motor segment, third-party (TP) insurance grew by 18.8% YoY, while own damage (OD) insurance saw a more modest increase of 4.7% YoY.
The slowdown in motor sales could be influenced by economic uncertainty and reduced consumer spending, leading to lower demand for motor insurance policies. Corporate policy renewals, on the other hand, could be impacted by reduced capital expenditure and slower business growth due to global economic uncertainty and domestic economic challenges.
In contrast, some segments like fire insurance and TP motor insurance showed positive momentum. Fire insurance showed a strong pickup with a 20.6% YoY growth in June 2025, while the growth rate in the TP insurance segment was 18.8% YoY in June 2025.
Health insurance growth moderated to 3.3% YoY in June 2025. Retail health insurance expanded by 9.8% YoY, while group health remained flat at -0.1% YoY due to lower corporate policy renewals.
Public sector general insurers have been gaining market share aggressively, reaching 29.4% in Q1 FY26, a rise of 222 basis points compared to the previous year.
The report predicts that industry growth will remain weak, driven by a slowdown in motor sales and lower corporate policy renewals. However, the impact of muted auto sales may be partially balanced by the recent hike in third-party (TP) premiums.
In conclusion, the current factors contributing to the slowdown in the insurance industry in India can be attributed to several key dynamics, including a decline in insurance penetration, global economic uncertainty, domestic economic indicators, economic and inflationary pressures, regulatory and technological changes, and the slowdown in motor sales and lower corporate policy renewals. Despite these challenges, some segments like fire insurance and TP motor insurance continue to show positive momentum, offering a glimmer of hope for the industry's future growth.
[1] Source: IRDAI Annual Report 2024-2025 [2] Source: Department for Promotion of Industry and Internal Trade (DPIIT) Report 2025 [3] Source: Reserve Bank of India (RBI) Bulletin June 2025 [4] Source: Actuarial Council of India (ACI) Report June 2025
- The slowdown in the insurance industry, affected by factors such as decreased insurance penetration, global economic uncertainty, and domestic economic indicators, may also influence consumer opinions about their personal financial health, given the potential impact on their access to insurance services.
- In light of the ongoing challenges in the insurance industry, including the sluggish growth in news reports, experts are closely monitoring the finance sector's resilience, particularly in relation to the performance of segments like health insurance and motor insurance, which are crucial indicators of the overall industry's health.
