The Indian insurance industry has shown remarkable growth compared to its regional counterparts, namely Thailand and China. With a gross written premium exceeding $130 billion, the industry experienced a Compound Annual Growth Rate (CAGR) of 11% during the fiscal year 2020-2023. In contrast, the insurance industries in Thailand and China grew at a slower pace, registering less than 5% growth over the same period, as indicated in a McKinsey & Company report.
The recent report, published on Thursday, outlined the upward trajectory of both the life and general insurance industries, as well as the challenges that must be addressed to ensure continued growth.
The report titled “Steering Indian Insurance from Growth to Value in the Upcoming ‘Techade’” highlighted that the life insurance sector achieved an annual growth rate of 11%, reaching $107 billion by 2023, while the general insurance sector grew at a rate of 15%, reaching $35.2 billion.
The life insurance sector has maintained an impressive annual growth rate of approximately 11%, reaching premiums totaling $107 billion by 2023. Concurrently, the general insurance sector experienced even more rapid growth, with a compound annual growth rate (CAGR) of 15%, resulting in a total business value of $35.2 billion during the same period. This exceptional performance has positioned Indian life insurers as leaders in terms of valuation multiples, with price-to-book (P/B) ratios ranging from seven to ten times higher than those of their peers in Asia.
“This robust performance, among other reasons, has allowed Indian life insurers to maintain valuation multiples, and price-to-book (P/B) of seven to ten times, compared with just one to two times for regional peers in Asia,” the global consulting firm said.
Despite the strong growth in premiums, the report revealed a decline in India’s insurance entry rate from 4.2% in 2022 to 4% in 2023, indicating a lag in progress relative to the country’s economic expansion.
Furthermore, the report pointed out that although the top five private life insurers in India recorded an impressive 17% CAGR in new business premiums, their net profits only grew at a rate of less than 2% over the past five years.
The McKinsey report revealed that the sector’s profit growth was considered disappointing due to rising operational costs such as increased commissions, employee expenses, marketing expenditures, and other overheads.
