The Indian insurance industry has seen remarkable growth compared to its regional counterparts, namely Thailand and China. With a gross written premium exceeding $130 billion, the industry registered a Compound Annual Growth Rate (CAGR) of 11% during FY 2020-2023. In contrast, the insurance industries in Thailand and China grew at a slower pace, growing by less than 5 percent over the same period, according to a McKinsey & Company report.

The recent report, released Thursday, highlighted the upward trajectory of both the life and non-life insurance industries, as well as the challenges that must be addressed to ensure continued growth.

The report titled “Steering Indian Insurance from Growth to Value in the Upcoming ‘Techade'” highlighted that the life insurance sector has achieved an annual growth rate of 11% to reach USD 107 billion by 2023, while the non-life insurance sector grew at a rate of 15. %, reaching 35.2 billion dollars.

The life insurance sector has maintained an impressive annual growth rate of around 11%, reaching premiums of USD 107 billion by 2023. At the same time, the non-life insurance sector has seen even faster growth, with a growth rate of compound annual growth rate (CAGR) of 15%, resulting in a total business value of $35.2 billion over the same period. This exceptional performance has positioned Indian life insurers as leaders in valuation multiples, with price-to-book (P/B) ratios ranging from seven to ten times that of their Asian peers.

“This robust performance, among other reasons, has enabled Indian life insurers to maintain valuation and price-to-book (P/B) multiples of seven to ten times, compared to just one to two times for regional peers in Asia. ” said the global consulting firm.

Despite strong premium growth, the report revealed a decline in India’s insurance penetration rate from 4.2% in 2022 to 4% in 2023, indicating a lag in progress with the country’s economic expansion.

Further, the report pointed out that while India’s top five private life insurers have posted an impressive CAGR of 17% in new business premiums, their net profit has only grown at a rate of less than 2% over the past five years .

The McKinsey report revealed that profit growth in the sector was considered disappointing due to rising operating costs such as increased commissions, employee expenses, marketing expenses and other overheads.