India's top insurers are operating at combined ratios of 110-113%, spending more than they earn on every policy, according to a new study by Praxis Global Alliance. This contrasts sharply with global direct-to-consumer (D2C) counterparts who operate profitably at 84-89% combined ratios. The report, titled 'General Insurance Industry Economics Uplift', analyzed company disclosures, IRDAI data, and conducted a consumer survey of 1,203 motor and health insurance customers across India. Praxis Global Alliance notes that almost 80% of insurance business in India remains intermediary-led through agents, brokers, bancassurance partnerships and OEM channels, resulting in intense competition for distributor mindshare. The study reveals that investment income of about 21% remains the primary driver of profitability, which illustrates a reliance on non-core earnings that dilutes operational strength compared to international players.
India's general insurance market reached ₹3.1 lakh crore ($34 billion) in FY25, with health and motor insurance together accounting for over 70% of premiums, as reported by Praxis Global Alliance. However, the industry's profitability is driven primarily by investment income of about 21%, which offsets an underwriting loss of approximately 13% of net written premium. This means insurers are making money not from underwriting business, but from returns on invested funds. The report notes that commission growth has outpaced premium growth across private insurers, PSU insurers and standalone health insurers after the revised Expense of Management (EOM) framework came into effect in 2023. A large part of growth has come from segments that add volume but deliver modest returns, according to the Praxis study.
The Praxis study reveals that aggressive intermediary-led competition is driving up commissions across the sector, with insurers increasingly writing low-cost group and crop insurance business to create expense headroom for higher retail commissions. As per the report, a senior insurance executive stated that "a lot of growth today is just being bought through commissions." The revised EOM framework, which shifted from product-level expense caps to portfolio-level flexibility, has given insurers greater freedom in managing commissions but may have intensified competition in retail categories. Industry executives cited in the report said insurers are writing group or crop business not because it's attractive, but to manage EOM requirements, then using that flexibility to fund higher commissions in retail products. Heavy reliance on distributors to sell 80% of new business leads to higher costs, which are impacting overall profitability and reinforcing the divergence in underlying economics despite similar overall profit pools.
Despite strong growth in scale, Indian general insurers exhibit structurally weak core insurance economics relative to global peers, according to the Praxis report. US-based and other global insurers generate positive underwriting profits, with investment income acting as a supplement rather than a support, which is reflective of stronger underwriting discipline. The structural difference is evident in operating metrics, with combined ratios remaining above 100% in India indicating persistent underwriting losses, whereas global peers consistently operate below 100%, demonstrating sustained underwriting profitability. Elevated loss ratios, competitive pricing pressures, and high distribution costs continue to constrain underwriting outcomes in India, reinforcing the divergence in underlying economics despite similar overall profit pools. The report highlights that commission growth has outpaced premium growth across all segments, creating additional pressure on core insurance economics.
The Praxis consumer survey of 1,203 motor and health insurance customers reveals a significant gap between what the intermediary model promises and what customers actually receive, as reported by Praxis Global Alliance. The study suggests that moving closer to global underwriting standards could materially expand industry profit pools and potentially double RoEs over time, while regulatory changes could help shift the industry toward more sustainable profitability models. Insurers continue to have weak ownership of customer relationships, with intermediaries largely controlling acquisition, renewals and engagement, creating what Praxis described as "reacquisition-led growth" where insurers repeatedly incur acquisition-like costs even during renewals. The report notes that almost 80% of insurance business in India remains intermediary-led through agents, brokers, bancassurance partnerships and OEM channels, resulting in intense competition for distributor mindshare.
