A veteran in the industry noted that climate change extends beyond natural disasters, encompassing new illnesses, heat-related workplace challenges, and risks to gig workers

As climate-related disasters and cyber threats surge, India’s general insurance industry is at a critical juncture, striving to address these "new age risks" while boosting penetration to protect a broader population. Industry leaders, speaking at a recent panel discussion, highlighted the need for innovative solutions, government collaboration, and mandatory coverage to mitigate the growing economic and social impacts of these challenges.

Climate change: A looming economic threat

With climate-related catastrophes like hurricanes and cyclones becoming more frequent—India has seen four cyclones in 2025 alone, compared to one every four to five years previously—the insurance sector is under pressure to evolve. A veteran in the industry noted that climate change extends beyond natural disasters, encompassing new illnesses, heat-related workplace challenges, and risks to gig workers. He emphasized that economic losses from catastrophic events far outstrip insured payouts, with only 10% of losses covered by insurance and government schemes. This gap results in a 2% GDP growth impact, pushing affected states into economic distress.

To address this, experts advocated for a collaborative approach between the government and insurers, proposing tiered solutions like catastrophic bonds and layered risk-sharing models. They cited successful frameworks in Japan, the UK, and Australia as potential blueprints for India. “The magnitude of the problem is not fully comprehended,” they warned, urging a roadmap that integrates global solutions like CAT bonds to make coverage foolproof.

Mandating coverage for greater penetration

One executive from a leading general insurance firm suggested mandating catastrophic coverage alongside utilities like electricity or gas connections. He highlighted that even he, an insurance platform operator, lacks home insurance for his fire-prone property, underscoring the penetration challenge. For small and medium enterprises (SMEs), the stakes are high—94% lack coverage, and 25% face bankruptcy after catastrophic losses. Making insurance a negligible, mandatory component for SMEs could spread risk and enhance economic resilience, with options for states to manage premiums through trusts or insurers.

Cyber Risks: A growing concern

Cyber risks are escalating, with India reporting the third-highest incidence of cyber fraud globally, costing 0.7% of GDP—potentially 2% when unreported crimes are factored in. Despite 490 million UPI users and 600 million daily transactions, cyber insurance penetration remains below 1%. Another executive from an insurance firm emphasized the need for innovative products, such as those covering password-sharing risks, to restore faith in financial institutions.

He stressed partnerships with tech companies to stay ahead of cybercriminals, who are “always two steps ahead.” He highlighted the lack of individual-level cyber insurance, noting that while institutions are often protected, individuals hit by digital scams have little recourse. He called for a retail-focused approach to cyber insurance, acknowledging that mandating such coverage is challenging but necessary given the rising tide of scams.

GST waiver boosts health insurance affordability

Recent reforms, including the waiver of GST on health insurance premiums, are making policies more affordable and accessible. Insurers are now focusing on reaching tier-2 and tier-3 cities and rural areas to boost penetration. A surge in health insurance growth is reported from 60% to 102% post-GST waiver, with renewals benefiting from lower premiums, improving customer retention. However, challenges remain.

While the GST cut moves the needle, it alone won’t solve the broader issue of insuring India’s 40-50 crore uninsured population. Companies proposed mandatory employer-provided health insurance, citing developed nations where such mandates ensure coverage. With an average monthly premium of Rs 3,000-4,000 for Rs 5 lakh family coverage, this could be affordable, especially with tax rebates, boosting India’s GDP growth by 1.2%.

The consensus is clear: addressing climate change, cyber risks, and healthcare affordability requires a unified approach. Insurers, the government, tech companies, and service providers must align interests to share risks and incentivize loss prevention. By mandating coverage, leveraging technology, and fostering transparency, India’s insurance industry aims to protect its citizens and bolster economic resilience in an era of escalating risks.