Non-life insurance premium growth masks sharp fall in crop, fire cover rates
Non-life insurance premium, including health, fire and crop, rose 9.5% year-on-year to ₹1.19 trillion in the first four months of the ongoing financial year (FY27), as intense competition and discounting pushed down rates in commercial insurance.
Crop insurance premium slumped by more than two-thirds during April-July to ₹1,183 crore from ₹3,544 crore a year earlier, while fire premium fell 28.5% to ₹10,062 crore from ₹14,063 crore. Health and motor insurance, however, grew at double-digit rates, supporting the overall premium collection, according to segment-wise data from the General Insurance Council, a body representing non-life insurance companies in India.
Non-life premium collection had grown 7.22% to ₹1.09 trillion in the April-July period of FY26.
The decline in crop premium collection was largely driven by Agriculture Insurance Company of India. Over April-July, the specialised state-owned insurer’s crop premium fell 88.8% to ₹173 crore from ₹1,539 crore a year earlier, and its total premium declined 87.9% to ₹191 crore. Among multi-line insurers, ICICI Lombard’s crop book fell to ₹3 crore from ₹369 crore a year earlier.
Hari Radhakrishnan, an expert at the Insurance Brokers Association of India, said structural changes to the Pradhan Mantri Fasal Bima Yojana, the government’s flagship crop insurance scheme, have constrained the premiums insurers can charge, including through a loss corridor beyond which insurers no longer bear claims, known as the “cup and cap” arrangement.
“Beyond a certain limit, such as a claim ratio of 110% or 130%, the insurance companies don’t have to pay, and riding on that there has been more intense competition. More insurance companies are now competing for the same crop insurance pie. That has also resulted in reduction of premium on the crop insurance,” he said.
He also said that the decline in fire insurance premiums was driven by pricing pressure, rather than a fall in the volume of risks covered. “There has been intense competition in the market for fire insurance and the pricing has come down as a result. The insurers are giving heavy discounts on the rates charged and hence the premiums have come down,” he said. “There has been 60 to 70% reduction in rates.”
Fire insurance’s share of the non-life market has fallen to 8.4% from 12.9% from a year earlier, with the decline seen across almost all insurers. Over April-July, ICICI Lombard’s fire premium fell to ₹1,248 crore from ₹1,815 crore a year earlier, New India Assurance’s to ₹1,681 crore from ₹2,241 crore and Oriental Insurance’s to ₹538 crore from ₹906 crore.
Health insurance premium grew 21.5% during April-July to ₹53,813 crore and now accounts for 45.1% of the non-life insurance market, against 40.6% a year earlier, according to the General Insurance Council data.
Retail health grew 31.6% to ₹20,381 crore, ahead of group health at 14.9%, reversing the recent pattern in which corporate covers led growth.
Motor insurance premium rose 13.9% to ₹35,812 crore, and standalone health insurers’ premium rose 31.7% to ₹16,827 crore.
The Economic Times had earlier reported that the Insurance Regulatory and Development Authority of India had written to insurers in July asking them to stop offering extreme discounts on fire policies, warning that such underwriting could threaten their financial position. Radhakrishnan said the letter is unlikely to change the behaviour of insurance companies.
“This is more of an admonishment or a message that has been sent across to the insurance companies saying that there is a huge reduction in premiums in this segment due to lack of underwriting discipline and it may not be sustainable,” he said. “The letter does not say that there will be some action taken or there will be penalties if you don’t do proper underwriting.”
He added that he has not seen much improvement in the market since the directive was issued, and that premium rate erosion continues.
The decline in crop premium may also be partly due to timing. “Crop insurance premiums are influenced by the timing of kharif enrolments, state participation and the recognition of government subsidies, which can result in significant year-on-year volatility in reported premium,” said Ankush Pathrabe, analyst, banking, financial services, and insurance (BFSI) research, CareEdge Ratings.
He said the decline may not reflect the full-year trend, as kharif enrolment typically extends through July, while a higher base a year earlier and the sharper drop at Agriculture Insurance Company amplified the decline.
Radhakrishnan, meanwhile, pointed out that lower crop insurance premiums benefit the exchequer more than farmers, who pay only a capped share of the premium. “When the premium comes down, the amount of subsidy which has to be given by the government also comes down, so the government is also relieved,” Radhakrishnan said. “That said, if there are too many claims and the loss corridor is breached, the governments have to bear the excess.”
