General insurance business in India facing stagnancy in 2020 due to COVID-19, forecasts GlobalData

India’s general insurance industry is set to grow by 4.0% in 2020, compared to the 10% in 2019, according to GlobalData, a leading data and analytics company.

GlobalData has revised India’s insurance forecast in the aftermath of the global COVID-19 outbreak. As per the latest data, India’s general insurance market is forecasted to grow at a compound annual growth rate (CAGR) of 6.2% during 2019-2023.

Pratyusha Mekala, Insurance Analyst at GlobalData, comments: “The country-wide lockdown that lasted for over two months added pressure on the economy that was already showing signs of slowing down. Indian economy is now expected to grow at 1.63% in the financial year 2020-21, as compared to the pre-COVID estimate of 6.4%. The slowdown in the economic activity will result in lower premium collections in the general insurance segment.”

Decline in key sectors such as auto, manufacturing and construction is expected to heavily impact insurance industry as they account for more than 47% of general insurance premiums in 2019.

Motor industry is facing severe slowdown due to supply chain disruptions, stalled production and low demand. In April 2020, automobile manufacturers registered zero sales due to the lockdown. Sales have picked up marginally in May after the lockdown restrictions were eased by the government; but are well below the pre-COVID levels.

Similar stagnation is observed in construction and real estate where demand has reduced by 30% during the first quarter of 2020. Contraction in these sectors is expected to result in the lower collection of new business premiums in the property insurance line of business.

Mekala concludes: “Lockdown restrictions are being eased by the government, however the risk of outbreak persists as large number of cases are being registered daily across the country. While the easing of lockdown restrictions will help revive the stalled business operations, recovery in general insurance segment is expected to be a protracted one, taking as long as the second half of financial year 2021.” 

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