New Delhi [India], May 21 (ANI): India’s general insurance market continues to remain heavily dependent on intermediaries for customer acquisition and policy sales, leading to high distribution costs and concerns around long-term profitability, according to a report by Praxis Global Alliance.
The report noted that nearly 80 per cent of new business in the Indian general insurance industry comes through intermediaries such as brokers, agents and corporate agents.
It stated that while this model has helped insurers rapidly expand their reach, it has also resulted in high customer acquisition costs, low customer ownership and weaker retention levels in key retail products.
The report said, “Indian market is its heavy dependence on intermediaries, which account for approx 80 per cent of new business.”
The report further highlighted that around 83 per cent of consumers believe insurance products are complex, making them dependent on agents and advisors while purchasing policies.
Many customers are unable to clearly understand the differences between plans, resulting in heavy reliance on intermediaries for policy selection and guidance.
According to the report, nearly two-thirds of customers cited “assistance in policy selection” as one of the top reasons for choosing agents or advisors while purchasing insurance.
Customers also rely on intermediaries for trust, service support and convenience during the buying process as well as claims handling.
The report stated that the Indian general insurance market has grown steadily over the years, with Gross Written Premium reaching around Rs 3.1 lakh crore in FY25, growing at an annual rate of 11.5 per cent across motor, health and commercial insurance segments.
Despite this growth, insurance penetration in India remains close to 1 per cent of GDP, significantly below global levels, indicating substantial room for expansion.
However, the report pointed out that this scale growth has not translated into proportional profitability improvements for insurers. Combined operating ratios have largely remained in the 105-115 per cent range, indicating persistent underwriting losses across the sector.
Most insurers continue to depend heavily on investment income to offset losses from core insurance operations.
The report said that, unlike global insurers, which generate profits through underwriting performance, Indian insurers remain structurally dependent on investment income.
It noted that investment income accounts for nearly 21 per cent of Net Written Premium, while underwriting losses remain around 13 per cent.
The report also observed that customer ownership largely remains with intermediaries rather than insurers themselves. Around 40-50 per cent of customers continue to purchase multiple financial products through the same agent, strengthening intermediary relationships and reducing insurers’ direct engagement with customers.
The report also highlighted high customer churn in the Indian insurance market. It noted that customers frequently switch insurers during policy renewals, particularly in motor insurance, where 36 per cent of surveyed respondents said they had changed providers at renewal.
This has led to what the report described as “reacquisition-led growth,” where insurers spend heavily to acquire customers already insured by competitors.
The report suggested that stronger direct-to-customer (D2C) engagement could help insurers improve retention, lower acquisition costs and strengthen profitability over the long term.
It stated, “D2C customer relationships are delivering higher insurer NPS Scaling direct channels could help turn the tide in insurer’s favor”
It added that global insurers with stronger D2C models have demonstrated better underwriting performance and lower combined ratios compared to intermediary-led models. (ANI)
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