Non-life insurance sector growth halved in FY25 amid industry weakness, Care Ratings reports

Mumbai: The growth of India’s non-life insurance industry was significantly reduced in FY25, with Care Ratings citing broad industry challenges. According to the agency’s report, although the sector surpassed the Rs 3 lakh crore mark, its performance was hindered by the implementation of the 1/n rule, subdued passenger vehicle sales, and ongoing weaknesses in the commercial insurance lines.

The 1/n rule refers to a method in which long-term premiums are recognized daily, rather than being accounted for at the start of the policy term.

Care Ratings’ analysis revealed that public sector general insurers saw a 5.5% year-on-year increase in gross direct premiums in March 2025. In contrast, private sector insurers recorded a decline during the same period. The growth in public insurers was largely driven by retail health, which helped offset the weakness in commercial insurance.

Standalone Private Health Insurers (SAHIs) experienced a moderation in growth, which slowed to 11.1% year-on-year in March 2025, down from the previous year’s rates. This slowdown was particularly evident in the second half of the fiscal year, following the adoption of the 1/n rule. However, SAHIs continued to gain market share, while private general insurers saw a decline in theirs.

Private non-life insurance companies saw their overall market share increase to 65.4% in FY25, up from 61% in FY23, reflecting the broader growth gap between public and private sector players. Despite the slowdown, the health insurance segment remained the largest and saw a shift in market share from 35.3% in FY23 to 38.6% in FY25, driven by consistent outperformance by SAHIs.

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The report also pointed out that despite slower overall growth, the retail segment remained resilient, outperforming other segments both in March 2025 and FY25. Care Ratings attributed the broader industry slowdown to factors like the end of the post-COVID boom and rising medical inflation, which made premiums more expensive and impacted affordability.The Group Health segment remained the largest in the sector, although its growth was slower in FY25 compared to FY24. Government health schemes also continued to decline. While SAHIs focused mainly on retail health insurance, general insurers dominated the group health business. As competition in the health insurance market is expected to intensify, the dynamics within the sector are likely to evolve in the medium term.

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