India’s general insurance industry is set to witness robust growth in the coming fiscal years, with ICRA forecasting an 8.7% increase in premium income in FY26 and a further 10.9% growth in FY27. This growth outlook reflects improving macroeconomic fundamentals, increasing demand for health and motor insurance, and the stronger performance of private sector insurers. The projected gross direct premium income (GDPI) is expected to reach Rs. 3.21-3.24 lakh crore (US$ 37.59–37.94 billion) in FY26.

The insurance industry growth is being driven by a combination of structural and cyclical factors. Among the most notable contributors are higher GDP growth, pricing discipline in commercial lines, continuing health insurance adoption, and a rise in vehicle sales. These elements are fostering steady expansion in product demand, especially among retail and corporate policyholders.

Private insurers are projected to outperform public sector insurers, increasing their share in the overall Gross Direct Premium Income (GDPI) to 70% by FY27, up from 68% in FY25. This shift indicates a structural change in the market, driven by superior operational efficiencies, greater capital availability, and stronger underwriting practices among private players.

In contrast, public sector general insurers are struggling to maintain pace due to persistent capital inadequacies. Their weak capital positions limit underwriting capacity and hinder market competitiveness. According to ICRA, three public sector general insurers (excluding New India Assurance) will require a capital infusion of Rs. 15,200–17,000 crore (US$ 1.78–1.99 billion) by March 2026 to maintain a 1.50x solvency ratio, assuming full forbearance on the Fair Value Change Account (FVCA).

Without this support, these insurers risk further weakening of financial positions, especially as solvency ratios excluding FVCA currently stand at a concerning negative 0.85. This reflects the urgent need for recapitalisation, which will be critical for them to remain viable and competitive in the evolving insurance landscape.

The previous financial year saw moderated GDPI growth, falling to 6.5% year-on-year compared to 15.5% in the earlier year. This slowdown was attributed to the economic downturn, reduced vehicle sales, and the implementation of the 1/n accounting method, which mandates spreading policy premiums evenly across the policy duration rather than upfront recognition. This change, while improving long-term financial accuracy, has dampened short-term reported revenues.

Despite challenges, private insurers demonstrated better underwriting practices and are positioned for sustainable growth. While their combined ratio (the sum of incurred losses and expenses as a percentage of earned premiums) deteriorated slightly in FY25 due to motor segment losses and increased expenses from new regulations, their profitability improved, driven by realised gains on equity investments. This illustrates the resilience and diversified revenue strategies employed by private players.

Health insurance continues to play a central role in driving premium growth. With increasing awareness post-pandemic and government focus on schemes like Ayushman Bharat, the segment has seen high traction from both retail and group insurance buyers. The expansion of private hospitals, growth in urban middle-class populations, and rising healthcare inflation are further enhancing demand.

The motor insurance segment, which had been under pressure due to weak automobile sales, is now showing signs of revival. Improved consumer sentiment, increasing vehicle registrations, and the mandatory nature of third-party coverage are aiding a steady rebound in this category.

Commercial lines, including fire, engineering, marine, and liability insurance, are witnessing renewed interest owing to infrastructure development, industrial activity, and better pricing discipline. Private insurers have been proactive in aligning their pricing with risks, improving long-term underwriting results.

On the regulatory front, the adoption of the 1/n revenue recognition framework by insurers ensures greater financial transparency and comparability. However, it has resulted in a short-term decline in reported premiums and heightened administrative costs during the transition period.

Looking ahead, ICRA expects overall market dynamics to remain in favour of private insurers, particularly given their technological investments, distribution expansion, and product innovation. They are also more agile in leveraging digital platforms, data analytics, and customised policy offerings, which resonate with millennial and urban buyers.

Public sector insurers, on the other hand, will need strategic restructuring, capital enhancement, and a renewed focus on operational efficiency to remain relevant. The long-standing issues of high claims ratio, low renewal retention, and limited product diversity must be addressed through reforms.

India’s general insurance penetration remains low compared to global averages, offering ample headroom for future growth. With increasing urbanisation, digitisation of services, rise in insurable assets, and growing awareness, the insurance sector is well-positioned for sustained expansion over the next decade.

Key challenges that may temper growth include macroeconomic volatility, regulatory compliance costs, and the need for timely capital infusion, especially for public players. However, these are likely to be outweighed by tailwinds from government reforms, private sector investments, and a maturing consumer base.

In summary, ICRA’s projections signal positive momentum for the Indian general insurance industry, with a stable-to-positive outlook across most sub-segments. The anticipated 8.7% GDPI growth in FY26 and 10.9% in FY27 underscore India’s transition to a more insured economy, backed by private sector innovation, digital adoption, and rising risk awareness.

The Upcoming IPOs in this week and coming weeks are Sacheerome Limited, Ganga Bath Fittings, Victory Electric Vehicles International, Wagons Learning.

The Current active IPO are 3B Films

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.