The rating agency expects gross direct premium of general insurers to grow by 12% to 15% in the medium term, with private insurers continuing to outperform state-owned insurers.
“Improving loss ratio along with increasing yield on investment will support profitability. Guidelines have been relaxed to raise subordinate loan And equity with lower solvency requirements in crop insurance will provide additional growth capital,” Kair said.
The rating agency expects the loss ratio to come down to 85% in the financial year ending March 2024 from a peak of 92% at the end of financial year 2022. The loss ratio is used in the insurance industry to represent the ratio of losses to premiums earned. Losses in proportion to losses include paid insurance claims and adjustment expenses.
Care said with claims stabilizing from the post-pandemic peak and increase in pricing of group health plans, the loss ratio will remain low. Though motor insurance Will be under pressure due to competition.
rising interest rates after reserve Bank of India The increase in rates will also support the return on debt investment of insurance companies. Relaxation of guidelines on investment will also help general insurance companies.
However, private sector insurance companies will continue to outperform public sector companies due to their better solvency ratio, profitability and capital position. Public sector general insurance companies will remain under pressure due to their dependence on the government for capital. CARE expects private sector general insurance companies to report 13% to 14% return on equity in the medium term, even as the profitability of public sector companies remains muted.
The overall low insurance penetration in India, easy norms like use and file, low regulatory filings and relaxation on distributor tie ups will support the growth of general insurers, even in the face of uncertain geopolitical environment, high inflation and capital crunch. Rising costs pose a risk to the sector.