London:
India’s general insurance industry is set to grow by 4.per cent in 2020 due to the disruptions caused by Covid-19 Pandemic, compared to the 10 per cent in 2019, according to GlobalData, a leading data and analytics company.
GlobalData has revised India’s insurance forecast in the aftermath of the global COVID-19 outbreak. As per the latest data, India’s general insurance market is forecasted to grow at a compound annual growth rate (CAGR) of 6.2 per cent during 2019-2023.
Pratyusha Mekala, Insurance Analyst at GlobalData, commented: “The country-wide lockdown that lasted for over two months added pressure on the economy that was already showing signs of slowing down. Indian economy is now expected to grow at 1.63 per cent in the financial year 2020-21, as compared to the pre-COVID estimate of 6.4 per cent. The slowdown in the economic activity will result in lower premium collections in the general insurance segment.”
Decline in key sectors such as auto, manufacturing and construction is expected to heavily impact insurance industry as they account for more than 47 per cent of general insurance premiums in 2019.
Motor industry is facing severe slowdown due to supply chain disruptions, stalled production and low demand. In April 2020, automobile manufacturers registered zero sales due to the lockdown. Sales have picked up marginally in May after the lockdown restrictions were eased by the government; but are well below the pre-COVID levels.
Similar stagnation is observed in construction and real estate where demand has reduced by 30 per cent during the first quarter of 2020. Contraction in these sectors is expected to result in the lower collection of new business premiums in the property insurance line of business.
International rating agency AM Best has maintained its negative outlook on India’s non-life insurance market.Overall, AM Best expected the Indian non-life market in the face of several headwinds over the medium term.Some of these factors include strong competition, poor pricing disciplineand reliance on investment activities for the profitability , have been prevalent for a number of years.
Mekala concludes: “Lockdown restrictions are being eased by the government, however the risk of outbreak persists as large number of cases are being registered daily across the country. While the easing of lockdown restrictions will help revive the stalled business operations, recovery in general insurance segment is expected to be a protracted one, taking as long as the second half of financial year 2021.”