By Ashish Tiwari

Nov 13 - (The Insurer) – India’s P&C insurance market is expanding amid rapid economic growth and regulatory reform but structural inefficiencies — from underinsured MSMEs to slow claims processes — continue to blunt its growth potential.

According to the Insurance Regulatory and Development Authority of India’s (IRDAI) Annual Report 2023-24, the non-life insurance industry underwrote total direct premiums of 2.90 trillion rupees ($32.99 billion) during the year, representing 12.76% growth over the previous year.

Industry executives say the momentum reflects India’s expanding industrial base, renewed infrastructure push and sustained policy support from the regulator.

Yet they caution that despite impressive premium growth, penetration remains among the lowest in Asia — below 1% of GDP — underscoring the gap between economic expansion and risk protection.

The country’s P&C insurance market is growing at an estimated 12% to 14% annually, outpacing many regional peers, driven by infrastructure projects and rising industrial output, said Nisheeth Srivastava, head of property, construction, power and infrastructure practice at Aon India.

Despite strong top-line expansion, large parts of the economy remain severely underinsured — most notably micro, small and medium enterprises (MSMEs), which form the backbone of Indian industry.

India has 71.35 million registered MSMEs, over 99% of which are micro enterprises. Yet fewer than 10% have adequate insurance coverage, according to insurance aggregator Policybazaar. Even a 10-percentage-point rise in MSME penetration could add 250 billion to 300 billion rupees in annual premiums, it said.

“The adherence to risk management is still low. The awareness or need to buy insurance hasn’t reached the MSME and SME segments effectively,” Srivastava said.

“Most insurance companies or brokers lack a network deep enough to reach these businesses, which are still served by individual agents who often lack the technical knowledge to upsell or explain the importance of risk management.”

Srivastava added that insurers are expanding capacity by 10% to 15% annually but awareness and adoption remain constrained, especially among MSMEs. He pointed to recent IRDAI reforms such as the “use and file” system, which are promoting innovation and competition in product design.

Transitioning from the micro to the mid-market and corporate segments, experts say India’s P&C sector now needs rapid professionalisation to fully capture its growth potential.

“India’s huge potential demands a quickly maturing insurance market, particularly for operational and human capital risks,” said Terence Williams, head of commercial risk solutions for Asia Pacific at Aon.

“Attracting and retaining talent across India’s financial services sector is increasingly difficult — it’s practically a full-time job.”

REINSURANCE DYNAMICS SHIFTING

The push to deepen penetration and sophistication comes amid shifting reinsurance dynamics. Gaurav Pagare, managing director at Marsh India, said local treaty reinsurance capacity rose by more than 10% in the past year, with new entrants such as Allianz Re and Valueattics Re intensifying competition.

Property insurance premiums increased by an average of 5% to 10% over the past year, though global trends suggest potential softening ahead. “Larger clients, however, continue to secure discounts,” Pagare said.

“India remains a largely profitable reinsurance market, benefiting from two years without major catastrophe losses, which is attracting capital inflows," he said. "But pricing remains softer than in global markets, and further softening in primary rates may prompt reinsurers to become cautious.”

Competition is also reshaping market share dynamics. Data from GlobalData shows foreign reinsurers’ market share in India rose to about 49% in FY 2023-24 and is projected to exceed 50% in 2025, while state-owned GIC Re’s share declined from around 74% in 2019 to 51% in 2023.

From a reinsurer’s perspective, Sudhir Salian, managing director of Peak Re India, told The Insurer that collaboration is vital in a diversifying market where GIC Re still holds 40% to 50% of ceded premiums but faces growing competition from about 20 large primary insurers and niche reinsurers.

CYBER RISK: THE NEXT FRONTIER

As insurers adjust to structural changes, cyber risk remains one of the most underinsured lines despite escalating threats.

Earlier this year, the Home Ministry informed parliament that India lost 228.45 billion rupees to cybercriminals in 2024 — a 206% surge from 74.65 billion rupees in 2023. The Indian Computer Emergency Response Team (CERT-In) handled about 2.04 million cybersecurity incidents in 2024, while IBM estimated the average cost of a data breach in India at 220 million rupees in 2025.

India’s cyber insurance market is projected to reach about 48 billion rupees in 2025, according to Policybazaar, with most mid-to-large organisations opting for sums insured between 10 million rupees and 100 million rupees. Sectors such as banking, financial services, insurance and information technology have higher adoption levels but remain far short of covering aggregate exposures.

“Cyber risk still remains underinsured and corporate India must seriously address this emerging exposure,” Pagare said.

He added that growth in construction, semiconductors, and infrastructure — alongside investments in global capability centres — is contributing to premium expansion.

To address long-standing concerns over claims, Marsh India has strengthened its technical and claims support. “Settlement delays remain a major concern, as do deductions from claims. Our dedicated team supports clients from pre-loss assessment through the full claims process,” Pagare said.

GROWTH DRIVEN BY EXPOSURE, NOT PRICING

Market experts note that much of India’s recent insurance growth stems from larger exposures rather than higher rates.

“Growth in the P&C sector today is coming from increased exposure — clients buying higher limits, better sums insured and more comprehensive coverage, including loss of profit protections. Pricing is at rock bottom and unlikely to rise for another year or so,” Srivastava said.

In 2025, India's non-life market has seen softer pricing across several commercial lines, though not across the board. While property firmed due to tariff changes, deductibles have mostly remained flat. Overall, market conditions mirror those in other Asian and BRICS economies.

Swiss Re’s medium-term outlook (2024-2028) projects India’s total insurance premiums to grow by 7.1% annually, with non-life (including health) expanding by 8.3% per year. However, it warns that a large natural catastrophe protection gap persists, with nearly 93% of exposures remaining uninsured.

BRIDGING THE PROTECTION GAP

Amitabh Dewan, business head of large corporate risks at Policybazaar, said the next phase of India’s P&C growth depends on expanding coverage depth and bridging key protection gaps.

“India’s P&C market continues to grow steadily but remains underpenetrated across MSME, catastrophe and cyber lines,” Dewan said.

“Bridging these gaps could unlock multi-lakh-crore premium opportunities while enhancing economic resilience. India’s insurance sector stands at a pivotal moment — where data-driven underwriting, robust digital infrastructure and deeper public-private collaboration can meaningfully bridge the protection gap.”

Industry executives agree that India’s non-life insurance market is at an inflection point — balancing strong growth and capital inflows with the need for deeper penetration, professionalisation and efficient claims handling.

The long-term opportunity, they say, lies in building product depth, adopting data-led pricing and leveraging technology-enabled distribution to expand coverage, strengthen resilience and drive sustainable profitability.

($1 = 87.8950 Indian rupees)