Other aspects like heavy reliance on distributors to sell 80 per cent of new business, leading to higher costs, are also impacting profitability, the report by a consulting firm has said.
Additionally, a large part of the growth has come from segments that add volume but deliver modest returns, the report by Praxis Global Alliance has said.
At 21 per cent of net written premium, investment income remains the primary driver of profitability, which illustrates a reliance on non-core earnings, it said.
“Despite strong growth in scale, Indian general insurers exhibit structurally weak core insurance economics relative to global peers,” the report said.
US-based and other global insurers generate positive underwriting profits, with investment income acting as a “supplement rather than a support”, which is reflective of a stronger underwriting discipline, it said.
The report said the structural difference is evident in operating metrics of the sector, and pointed to the combined ratios, which remain above 100 per cent in India, indicating persistent underwriting losses, whereas global peers consistently operate below 100 per cent, demonstrating sustained underwriting profitability.
“Elevated loss ratios, competitive pricing pressures, and high distribution costs continue to constrain underwriting outcomes in India, reinforcing the divergence in underlying economics despite similar overall profit pools,” it said.