General insurance business in India is expected to contract by 9% in 2020 due to COVID-19, a sharp decline from the 10% growth witnessed in 2019, according to GlobalData, a leading data and analytics company.
GlobalData has revised India’s insurance forecast in the aftermath of COVID-19 outbreak. As per the latest data, India’s general insurance market is expected to register a compound annual growth rate (CAGR) of 4.7% over 2019-2024, as compared to the pre-COVID forecast of 11.9%, primarily due to the ongoing economic uncertainty and the imposition of country-wide lockdown restrictions.
Pratyusha Mekala, Insurance Analyst at GlobalData, comments: “The Indian economy is projected to contract sharply by 4.5% in FY2021, primarily due to the economic impact of the pandemic. With businesses coming to a grinding halt and consumer spending on a decline, the general insurers are expected to witness lower premium collection.”
The impact of economic slowdown is most evident in motor insurance, which accounted for one-third of general insurance premiums in 2019. During January to July 2020, motor insurance premiums registered year-on-year decline of 19.2%, according to the Insurance Regulatory and Development Authority of India (IRDAI).
The recent regulatory changes are expected to further affect motor insurance premium. In March 2020, to provide relief to policyholders during the pandemic, IRDAI postponed planned premium hike ranging between 2-10%, on third-party liability insurance.
Similarly, stagnation is expected in property insurance as construction industry grappled with supply chain disruptions and shutdowns due to lockdown restrictions.
The construction industry is expected to register a decline in spending as government will look to divert planned capital expenditure on construction activity towards healthcare and public welfare activities. As a result, property insurance is now expected to register a CAGR of 6.0% during 2019-2024, against pre-COVID forecast of 10.8%.
Insurers are capitalizing on the increased demand for health insurance policies to compensate for the negative impact from other business. Health insurance premiums grew by 18% year-on-year in July 2020, as insurers revamped product portfolio to meet consumer demand.
Ms Mekala concludes: “The spike in COVID-19 infections across the country has dampened the prospects of quick recovery in general insurance business. While pick-up in health insurance business is an encouraging sign, the revival in general insurance business activity is expected to be a protracted one.”