Unpacking Structural Pressure: RBI's Concerns on Insurance Sector Dynamics

The Reserve Bank highlighted rising structural pressures in the insurance sector, with premium growth driven by costly distribution strategies instead of efficiency. No immediate systemic risks are posed, but factors like high expenses affect mid-term sustainability. A shift to cost-efficiency and technology adoption is necessary for resilience and coverage expansion.

The Reserve Bank has raised concerns about structural pressures within the insurance sector, as outlined in its latest financial stability report.

The report highlights that while there are no immediate systemic risks, the reliance on high-cost distribution strategies has overshadowed operational efficiency as a driver for premium growth. This approach may affect medium-term sustainability and hinder the expansion of coverage.

It calls for a reorientation towards cost rationalisation and technology-driven distribution models to enhance consumer value and the sector's long-term resilience.

(With inputs from agencies.)