India’s slowing economy will weigh on insurance premium growth over the next two to three years, however, low insurance penetration and supportive measures put in place by the insurance regulator will help counterbalance the deteriorating economic environment, global rating agency Moody’s Investor Services said on Tuesday.

Mumbai: India’s slowing economy will weigh on insurance premium growth over the next two to three years, however, low insurance penetration and supportive measures put in place by the insurance regulator will help counterbalance the deteriorating economic environment, global rating agency Moody’s Investor Services said on Tuesday.

“India's GDP growth weakened to its slowest rate in five years in the fiscal year ended March 2019, and the resultant financial pressure on rural households amid weaker job creation is in turn also weighing on premium growth,” says Benjamin Serra, senior vice-president, Moody's.

By the Irdai’s December 2019 data, the non-life insurance sector witnessed a significant slowdown. The general insurance companies reported weak growth of 6 per cent in premiums, excluding crop insurance business, down from 11-18 per cent seen in the prior five months.

However, Atul Sahai, CMD of New India Assurance, sounded optimistic. “Once in 10 years, big economies do witness a slowdown but it is cyclical and it is just a matter of time that economic growth will rebound.”

The GDP growth slowed to 6.8 per cent in fiscal 2018 and could slow further to 4.9 per cent in fiscal 2019 before recovering to 6.3 per cent in fiscal 2020, said Moody’s.

“Nevertheless, the country's low insurance penetration rate (at 3.7 per cent) suggests ample room for further growth, while supportive government and regulatory initiatives are also helping mitigate the currently challenging environment,” added Serra.

Health premiums in particular are likely to increase because of Ayushman Bharat, which aims to provide 100 million families with up to Rs 5 lakh of health coverage each year.