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Slowdown to affect insurance sector: Report
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SME Times News Bureau | 22 Jan, 2020
The slowing Indian economy will weigh on insurance premium growth over
the next two-three years, Moody's Investor Service said on Tuesday but
added that supportive measure taken by regulator IRDAI will help
counterbalance the deteriorating economic environment.
"India's
GDP (gross domestic product) growth weakened to its slowest rate in five
years in the fiscal year ending March 2019, and the resultant financial
pressure on rural households amid weaker job creation is in turn also
weighing on premium growth," said Moody's Senior Vice President Benjamin
Serra.
According to the latest estimates by the Indian
Statistics Department, the economy will grow at 5 per cent in the
current fiscal ending in March, slower than the 6.8 per cent growth
recorded in 2018-19. GDP growth fell to a six-and-a-half-year low in the
quarter ended September.
However, low insurance penetration
rates in India also suggest there is still ample room for growth.
According to Moody's, health premiums are likely to increase due to the
government's Ayushman Bharat scheme that was launched in September 2018.
Billed as the world's largest health assurance scheme, Ayushman
Bharat aims to provide free health insurance of Rs 5 lakh per family to
nearly 40 per cent of the population --more than 100 million poor and
vulnerable families each year.
"Nevertheless, the country's low
insurance penetration rate suggests ample room for further growth, while
supportive government and regulatory initiatives are also helping
mitigate the currently challenging environment for Indian insurance and
reinsurance companies," Serra said.
Moody's further said that
the insurance regulator has taken series of measures, which includes
removing the limit on foreign ownership stakes in Indian insurance
intermediaries. The step, announced in the Union Budget in July 2019, is
aimed at bringing in global products, practices, and sales strategies
to India's insurance sector.
"IRDAI also plans to introduce a
new risk-based capital (RBC) regime with similar principles to Solvency
II in Europe. This is likely to improve Indian insurers' risk
management, a credit positive. While many of the large private insurers
have already adopted a risk-based approach to managing capital, we
expect the new system will pose some implementation hurdles,
particularly for smaller insurers," Moody's said.
This could encourage market consolidation, further enhancing the competitive advantage of larger players, it added.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
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66.20
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64.50 |
UK Pound
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87.50
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84.65 |
Euro
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78.25
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75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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