Mumbai: Rating agency Standard & Poor’s has downgraded business outlook for Indian non-life insurance industry from stable to negative expecting the underwriting business to decline.
"The negative outlook on India reflects our view that underwriting performances are likely to stay very weak this year despite strong growth potential for premiums," S&P said in its report titled 'Asia-Pacific Nonlife Insurance'.
S&P conducted a review of 12 non-life insurance markets.
The rating agency believes the underwriting performance of India is not likely to improve in the next 12 months, in spite of prices stabilizing. “The industry's combined ratio has been well over 100% for many years, indicating a lack of profitability. Our estimate for the ratio was 121% in 2010. The overall industry remains profitable through investment income, but that can leave it vulnerable to investment market shocks.” the report said.
Prices in India and Taiwan have dropped since the removal of tariffs. India's weak pricing led to the largest underwriting loss of all markets.
According to industry experts the penetration of general insurance in India remains low at 0.6 per cent of Gross Domestic Product on account of low consumer preference, untapped rural markets and restrictive distribution channels.
“The negative outlook on India could change quickly if pricing improves and underwriting results significantly strengthen, given a low penetration rate,” the report added.