“Margins are under pressure due to price competition in standard products and higher distribution and operating costs. To respond, insurers need to use capital with discipline, focus on strong underwriting, control costs and build scalable operations to sustain profitable growth,” Deloitte India said in a report titled ‘State of Financial Services in India’.
The report said rising foreign capital inflows and evolving policy frameworks, including potential changes such as composite licensing, are reshaping competition and capital deployment in the insurance industry.
The report noted that insurance penetration in India remains below global benchmarks, with industry growth continuing to be skewed towards investment-linked products rather than pure protection, health and retirement solutions.
It further highlighted that gaps in insurance coverage are more acute in rural and semi-urban markets because of low awareness, income variability, and limited distribution reach.
To address these challenges, insurers will need to shift towards protection-led products, improve claims servicing, and leverage technology-led distribution models to expand reach and rebuild customer trust, the report said.
The study also outlined broader trends across the financial services sector, noting that MSME lending is shaping up as the next structural growth engine, although it would require sharper risk-based guarantee calibration and rationalised pricing.Corporate banking is also approaching a key transition phase, with acquisition financing, ecosystem-driven transaction banking propositions and differentiated underwriting capabilities for sunrise sectors emerging as critical growth themes, it said.
The report further said cross-border payments globally are approaching a structural inflection point as financial institutions grapple with persistent challenges such as high transaction costs, slow settlement cycles, limited transparency, and fragmented compliance requirements across correspondent chains.
“Financial institutions will need to respond to growing demand for alleviation of long-standing pain points,” it said.
On financial inclusion, the report observed that banks and non-banking finance companies have an opportunity to displace informal lenders through same-day loan processing, aided by technology-driven underwriting and faster credit delivery mechanisms.