Emkay Global expects life, general insurers to post steady Q3 growth despite margin pressure

Life, general and health insurers are likely to report healthy premium growth in the December quarter of FY26, supported by favourable changes in the goods and services tax (GST) regime, according to a report by Emkay Global Financial Services.

The brokerage, however, expects profitability to remain under pressure due to input tax credit (ITC) losses, higher commissions and regulatory-related costs.

In its Q3FY26 insurance sector note, Emkay said operating performance across segments should remain satisfactory as improved affordability lifts demand. Premium growth momentum is expected to strengthen, even as margin expansion remains limited.

Life insurance: Growth improves, margins constrained

Life insurers are projected to post healthy growth in annualised premium equivalent (APE) during the quarter, helped by GST-led affordability gains and the normalisation of base effects following revised surrender value regulations.

Protection products are expected to benefit the most, with rising preference for term insurance supporting volumes.

Among private players, Axis Max Life is expected to lead growth, followed by SBI Life, HDFC Life and ICICI Prudential Life. State-owned Life Insurance Corporation of India (LIC) is also likely to report strong APE growth, supported by a favourable retail base and steady traction in group business.

Despite the improvement in premiums, value of new business (VNB) margins are expected to remain under pressure.

Emkay attributed this to GST ITC losses, partly offset by a shift towards higher-margin non-par and protection products, ongoing distributor negotiations and operational efficiency gains. Higher gratuity provisions following the implementation of labour codes are also expected to weigh on reported profitability.

General insurance: Motor and health drive momentum

General insurers are expected to deliver healthy gross written premium (GWP) growth, led by motor and retail health segments.

Emkay said lower GST rates are likely to support new vehicle sales, boosting growth in motor own-damage policies. Retail health insurance is also expected to see strong demand due to improved affordability after GST exemptions.

In contrast, growth in group health insurance may remain modest amid intense competition. Combined ratios are likely to stay elevated, driven by higher commission payouts, although some insurers may see marginal improvement in claims ratios.

Emkay expects GST ITC losses to have a limited impact on multi-line general insurers, with investment income helping support profit after tax during the quarter.

Health insurance: Retail demand remains strong

The health insurance segment is projected to report robust growth in retail premiums, supported by GST exemptions and the normalisation of base effects related to the 1/n regulation. Improved affordability is expected to drive demand, particularly for individual policies.

Claims ratios are likely to remain elevated due to higher claim frequency and severity, although the brokerage expects a modest improvement in claims experience during the quarter. Emkay said it continues to monitor medical cost inflation, which remains a key risk for the segment.

Outlook and market view

Looking ahead, Emkay expects life insurers to sustain healthy APE growth as GST tailwinds continue and base effects stabilise. General insurers are likely to maintain steady growth in motor and health lines, while health insurers should see sustained premium expansion on the back of affordability gains and easing regulatory pressures.

From an equity market perspective, the report noted that while regulatory overhangs—particularly around commissions—persist, recovery in growth momentum and gradual improvement in profitability will be critical for insurance stock performance.