"With the Indian economy forecast to grow at 7.5 per cent in 2008 and given rising income levels and higher risk awareness among insureds, the country's insurer are optimistic about demand for their products," Moody's Investors Services and ICRA said in a new report.
Based on expectations for steady fundamental credit conditions in the sector over the next 12-18 months, the outlook for general insurance industry in India is stable, the report said.
"However, intense competition from new entrants, deregulation and a moderation in returns from the equities market will pressure pricing and ultimately short-term profitability," the report added.
Over the years, India has opened up for private sector insurers and has adopted international standards, regulations and changes in distribution strategies.
"The Indian insurance sector is rapidly moving towards international standards of free (risk-based) market pricing and new or innovative product offerings," the report said.
India, which is the fifth largest premium market in Asia, has changed radically over the last seven years during which the sector was opened for private participation, the report added.