Robust economic growth, digitisation to drive India's insurance premium expansion: Moody’s
Moody’s also highlighted the positive impact of the Goods and Services Tax (GST) exemption on individual life and health insurance policies, which is expected to make products more affordable, boost demand and improve insurance penetration.
- Jan 19, 2026,
- Updated Jan 19, 2026 2:28 PM IST
India’s insurance industry is set to benefit from sustained premium growth driven by strong economic expansion, rising digitisation, tax changes and planned reforms in the state-owned insurance sector, Moody’s Ratings said in a report on Monday.
The rating agency expects India’s economy to grow 7.3% in FY26 (April-March), a pace that should lift household incomes and support demand for life and non-life insurance products. Total insurance premiums rose 17% in the first eight months of FY26, significantly outpacing the 7% growth recorded in all of FY25, underlining the sector’s accelerating momentum.
Moody’s said increasing digitisation across the insurance value chain has made products more accessible, contributing meaningfully to premium growth. These efforts align with the regulator’s long-term vision of achieving ‘Insurance for All’ by 2047. Despite recent gains, insurance penetration in India remains far below that of developed markets, indicating substantial headroom for future growth.
The agency noted that strong premium growth should help improve the industry’s currently weak underwriting profitability, which has been weighed down by subdued pricing and rising claims. In FY25, while the Indian insurance industry posted cumulative profits of over ₹736 billion, it remained loss-making at the underwriting level, with claims rising 6.4% in life insurance and 6.6% in non-life insurance.
Moody’s also highlighted the positive impact of the Goods and Services Tax (GST) exemption on individual life and health insurance policies, which is expected to make products more affordable, boost demand and improve insurance penetration. During the first eight months of FY26, new individual life and health premiums grew 9% and 14% year-on-year, respectively. However, the agency cautioned that the benefit to insurer profitability will be partly offset by the loss of income tax credits following the removal of GST.
Government-led reforms of the dominant public sector insurance segment are expected to play a critical role in shaping pricing and profitability trends. The Centre has previously sold a minority stake in Life Insurance Corporation of India and proposed recapitalisation of certain state-owned insurers, subject to improvements in underwriting performance. Other measures under consideration include mergers and potential privatisation of public sector insurers, which Moody’s described as “credit positive.”
However, the agency pointed out that large state-owned insurers have historically prioritised market share over underwriting discipline, often pricing products at artificially low levels. This has made it difficult for private insurers to pass on rising claims costs. Moody’s said it remains unclear when long-delayed reform initiatives will yield material results, citing operational and legislative hurdles.
If public sector insurers are able to sustainably improve underwriting and pricing discipline, pricing pressures across the sector could ease. This would allow private insurers to price more sustainably, strengthen solvency positions and improve profitability, the report said.
Despite the favourable growth outlook, Moody’s expects capital adequacy pressures to persist due to rapid premium growth and evolving regulatory requirements, including the introduction of risk-based capital norms and stricter governance standards. As a result, insurers are likely to raise additional capital through initial public offerings, equity infusions and subordinated debt issuance.
The agency also termed the increase in the foreign investment limit in insurance to 100% as credit positive, noting that it would support capital strength, product innovation, financial flexibility and governance standards. At the same time, Moody’s cautioned that limited investor appetite for subordinated debt could pose challenges, given its lower liquidity and higher credit risk.
Overall, Moody’s said India’s insurance sector remains well-positioned for long-term growth, supported by favourable demographics, rising incomes and policy support, even as profitability and capital management remain key challenges in the near term.
India’s insurance industry is set to benefit from sustained premium growth driven by strong economic expansion, rising digitisation, tax changes and planned reforms in the state-owned insurance sector, Moody’s Ratings said in a report on Monday.
The rating agency expects India’s economy to grow 7.3% in FY26 (April-March), a pace that should lift household incomes and support demand for life and non-life insurance products. Total insurance premiums rose 17% in the first eight months of FY26, significantly outpacing the 7% growth recorded in all of FY25, underlining the sector’s accelerating momentum.
Moody’s said increasing digitisation across the insurance value chain has made products more accessible, contributing meaningfully to premium growth. These efforts align with the regulator’s long-term vision of achieving ‘Insurance for All’ by 2047. Despite recent gains, insurance penetration in India remains far below that of developed markets, indicating substantial headroom for future growth.
The agency noted that strong premium growth should help improve the industry’s currently weak underwriting profitability, which has been weighed down by subdued pricing and rising claims. In FY25, while the Indian insurance industry posted cumulative profits of over ₹736 billion, it remained loss-making at the underwriting level, with claims rising 6.4% in life insurance and 6.6% in non-life insurance.
Moody’s also highlighted the positive impact of the Goods and Services Tax (GST) exemption on individual life and health insurance policies, which is expected to make products more affordable, boost demand and improve insurance penetration. During the first eight months of FY26, new individual life and health premiums grew 9% and 14% year-on-year, respectively. However, the agency cautioned that the benefit to insurer profitability will be partly offset by the loss of income tax credits following the removal of GST.
Government-led reforms of the dominant public sector insurance segment are expected to play a critical role in shaping pricing and profitability trends. The Centre has previously sold a minority stake in Life Insurance Corporation of India and proposed recapitalisation of certain state-owned insurers, subject to improvements in underwriting performance. Other measures under consideration include mergers and potential privatisation of public sector insurers, which Moody’s described as “credit positive.”
However, the agency pointed out that large state-owned insurers have historically prioritised market share over underwriting discipline, often pricing products at artificially low levels. This has made it difficult for private insurers to pass on rising claims costs. Moody’s said it remains unclear when long-delayed reform initiatives will yield material results, citing operational and legislative hurdles.
If public sector insurers are able to sustainably improve underwriting and pricing discipline, pricing pressures across the sector could ease. This would allow private insurers to price more sustainably, strengthen solvency positions and improve profitability, the report said.
Despite the favourable growth outlook, Moody’s expects capital adequacy pressures to persist due to rapid premium growth and evolving regulatory requirements, including the introduction of risk-based capital norms and stricter governance standards. As a result, insurers are likely to raise additional capital through initial public offerings, equity infusions and subordinated debt issuance.
The agency also termed the increase in the foreign investment limit in insurance to 100% as credit positive, noting that it would support capital strength, product innovation, financial flexibility and governance standards. At the same time, Moody’s cautioned that limited investor appetite for subordinated debt could pose challenges, given its lower liquidity and higher credit risk.
Overall, Moody’s said India’s insurance sector remains well-positioned for long-term growth, supported by favourable demographics, rising incomes and policy support, even as profitability and capital management remain key challenges in the near term.