Page 63 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 51

Figure 4: Projection of Fire Insurance Premium - 2030

Fire Premium

As we can see from the above chart (figure 4), the fire insurance premium grew from Rs.2821 crore in
2001 to Rs.12910 in 2020 and suddenly grew bigger from 2020 onwards, currently around Rs.21360 in
2022. This sudden growth may be due to the introduction of India Insurance Bureau (IIB) benchmarking
rates in the market. GIC Re, the national reinsurer, also impressed insurers to adopt the industry-burning
cost premium to get the required reinsurance support. However, property risk exposures are growing
significantly due to climate change and the expansion of tier-2 & tier-3 cities due to the huge migration of
workers into the cities. Infrastructure developments have also increased in recent periods. Considering
these developments, the fire and engineering insurance will grow significantly during the next five years,
and the industry fire & engineering premium will reach Rs.34,827 crore in 2030, as predicted by the model.
Considering rising property risk exposures due to climate risk, the industry premium will grow to Rs.
42,914 at the optimum level. However, the following issues still impact India’s fire insurance business:
 The premium share of this portfolio has now shrunk to 8%, mainly due to higher rate cutting in
premiums and generous discounts, even with the introduction of IIB’s benchmarking rates.

 The ICR of the portfolio has also been growing to 80%, which was less than 40% in 2010.

 The rising frequency of Catastrophe Risks due to climate change would pose a significant challenge,
further affecting the portfolio’s profitability.

 The Insurance Protection Gap is also wider (90%) due to higher economic losses from the rising severity
of catastrophe risks. Further, the percentage of insured losses covered in India is less than 10%.

Some needed solutions

 Foster Innovation, deepen penetration through product and distribution reform and create an
environment to attract capital.

 Improve the portfolio growth and profitability through focused regulatory guidelines and an easy
use-and-file system.