The insurance industry should aspire to grow in double digits and in a sustained manner, Insurance Regulatory and Development Authority of India (Irdai) Chairperson Ajay Seth said at the FE Insurance Summit 2025 here on Friday. “Growth has been in single digits. But in a country with a (large) young population, the growth has to be nominal growth of the economy plus 4-5%. And that should be sustained over the next two decades. That is the kind of a number we should be looking for,” Seth said.
Insurance premiums touched RS 11.19 lakh crore in FY24
According to the Irdai annual report of 2023-24, total insurance premiums across categories stood at Rs 11.19 lakh crore. Life insurers accounted for Rs 8.30 lakh crore, posting a 6.06% growth. General insurers reported premiums of Rs 1.73 lakh crore while health insurance, including personal accident and travel cover, contributed Rs 1.17 lakh crore.
Seth also said that the issue of capital requirements is under review, with the industry acknowledging the need for more capital but also stressing the importance of its optimum utilisation. He said that while the prescribed solvency ratio is 1.5, the industry average is closer to 2, raising questions about whether business opportunities are lacking, whether returns from idle funds are seen as more profitable, or whether capital allocation across risks remains inefficient.
The Irdai chief also highlighted that the cost of doing business for life as well as general insurance companies is high and poses a big challenge. He said that for general insurance companies, it could be as high as 30-35% and for life insurance companies excluding Life Insurance Corporation (LIC), it would be close to 19%.
High operating costs make premiums unsustainable
“Any business that spends nearly one-third of its resources on procuring and conducting business, while the remainder must cover the risk pool, inevitably ends up with premiums that are not affordable and services that are difficult to sustain,” he said.
Seth said the focus should be on ensuring reach of insurance products and making them affordable. The insurance industry must evolve product designs and explore new areas such as climate and calamity risk coverage, as well as longevity products, among others, Seth said. He urged industry players to improve the claim settlement process and work towards customer centricity. For customer centricity, significant reforms will be needed at the levels of insurers, distributors as well as the authorities, he added.