Advantage India
Robust
Demand
*India's insurance sector has witnessed significant growth, with the domestic market expanding at CAGR of 17% over the past two decades. It is projected to reach Rs. 19,30,290 crore (US$ 222 billion) by FY26. This growth has been driven by increased awareness, favorable regulatory changes, and greater participation from the private sector.
Attractive
Opportunities
*Robotic Process Automation (RPA) and AI will occupy center stage in insurance, driven by newer data channels, better data processing capabilities and advancements in AI algorithms.
*Bots will become mainstream in both the front and back-office to automate policy servicing and claims management for faster and more personalized customer service.
Policy
Support
*The Indian government has increased the Foreign Direct Investment (FDI) limit in insurance companies from 74% to 100%, enabling complete foreign ownership. This strategic decision is intended to attract additional capital into the long-term, capital-intensive insurance sector, ensuring that insurers invest all collected premiums within the country.
*Insurance cover for 44.6 crore persons under PM Suraksha Bima and PM Jeevan Jyoti Yojana was provided during FY23.
Increasing
Investments
*Over the past nine years, the insurance sector has attracted significant Foreign Direct Investment (FDI) amounting to nearly Rs. 54,000 crore (US$ 6.5 billion), driven by the government's progressive relaxation of overseas capital flow regulations.
*The IPO of LIC of India was the largest IPO ever in India and the sixth biggest IPO globally in FY22.
Introduction
India’s Insurance industry is one of the premium sectors experiencing upward growth. This upward growth of the insurance industry can be attributed to growing incomes and increasing awareness in the industry. India is the fifth largest life insurance market in the world's emerging insurance markets, growing at a rate of 32-34% each year. In recent years, the industry has been experiencing fierce competition among its peers which has led to new and innovative products within the industry.
Over the past nine years, the insurance sector has attracted substantial foreign direct investment amounting to nearly Rs. 54,000 crore (US$ 6.5 billion), driven by the government's progressive relaxation of overseas capital flow regulations.
The insurance industry of India has 57 insurance companies - 24 are in the life insurance business, while 34 are non-life insurers. Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. There are six public sector insurers in the non-life insurance segment. In addition to these, there is a sole national re-insurer, namely General Insurance Corporation of India (GIC Re).
Other stakeholders in the Indian Insurance market include agents (individual and corporate), brokers, surveyors and third-party administrators servicing health insurance claims.
The insurance industry has undergone numerous transformations in terms of new developments, modified regulations, proposals for amendments and growth in FY22. These developments have opened new avenues of growth for the industry while ensuring that insurers stay relevant with changing times and the latest digital disruptions.
The Insurance Regulatory and Development Authority India (IRDA) is vigilant and progressive and is determined to achieve its mission of ‘Insurance for all by 2047’, with aggressive plans to address the industry’s challenges.
The growth of the insurance market is being supported by important government initiatives, strong democratic factors, conducive regulatory environment, increased partnerships, product innovations, and vibrant distribution channels.
Insurance Industry was largely dominated by offline channels like corporate agents, offline brokers or banks. Today, rapid digitization, product innovation and progressive regulation policies have made it possible for consumers to buy insurance through multiple distribution channels with the click of a button. The instability of the covid-19 pandemic highlighted the necessity for consumers to invest in products that would increase financial security, one of them being life insurance.
Market Size
The insurance industry in India has witnessed an impressive growth rate over the last two decades driven by the greater private sector participation and an improvement in distribution capabilities, along with substantial improvements in operational efficiencies.
In FY24, non-life players’ saw a premium income increase by 19.5% year-over-year to Rs. 1,14,972 crore (US$ 13.8 billion) due to strong demand for health and motor policies. The business growth for FY24 was driven by health (especially the group segment), motor, and crop insurance.
In FY24, India's insurance premium penetration accounted for 3.7% of the GDP, with life insurance making up 2.8% and non-life insurance comprising 0.9%. While the share of insurance to GDP declined, there was a modest increase in per capita premium from Rs. 8,035 (US$ 92.0) in FY22 to Rs. 8,297 (US$ 95.0) in FY23.
Non-life insurers are projecting double-digit growth in CY25. This optimistic outlook is attributed to a supportive regulatory environment and the introduction of innovative product offerings designed to meet customer needs.
India's insurance sector has witnessed significant growth, with the domestic market expanding at CAGR of 17% over the past two decades. It is projected to reach Rs. 19,30,290 crore (US$ 222.0 billion) by FY26. This growth has been driven by increased awareness, favorable regulatory changes, and greater participation from the private sector.
In FY25 (April-Jan), life insurers’ new business premiums grew to Rs. 3,05,912 crore (US$ 35.5 billion), according to Life Insurance Council data.
In the first-year premium share of life insurance in India, LIC dominates with 56.96%, while the private sector holds 43.04%.
Among the private players, SBI Life, HDFC Life and ICICI Prudential Life led the industry in premium collection. SBI Life collected Rs. 29,530 crore (US$ 3.42 billion) premium, while HDFC Life and ICICI Prudential Life received Rs. 25,672 crore (US$ 2.98 billion) and Rs. 16,916 crore (US$ 1.96 billion), respectively.
In the April-Jan period of FY25, the Life Insurance Corporation of India (LIC) recorded a 7.8% YoY increase in new business premium.
From total insurance new business premium collection, LIC alone contributed over 56.96% to the total new business premium collection. The insurer received close to Rs. 1.74 lakh crore (US$ 20.19 billion) as premium in FY25 (April –Jan) compared to Rs. 1.66 lakh crore (US$ 19.28 billion) for the same period.
The non-life insurance market in India reached Rs. 2,21,765 crore (US$ 25.7 billion) in FY24 (Until December 2023).
Non-life insurers (comprising general insurers, standalone health insurers and specialized insurers) recorded a 14.1% growth in gross direct premiums, gross premiums written off by non-life insurers reached Rs. 2,13,485 crore (US$ 24.7 billion) in FY24 (until December 2023).
No of non-life insurance policies witnessed a decline from 301.8 million in FY23 to 205.1 million in FY24.
In FY24, the linked premium was at 15% and 85% in non-linked premiums.
According to S&P Global Market Intelligence data, India is the second-largest insurance technology market in Asia-Pacific, accounting for 35% of the US$ 3.66 billion Insurtech-focused venture investments made in the country.
Investments and Recent Developments
The following are some of the major investments and developments in the Indian insurance sector.
- As announced in November 2023, Zurich Insurance Group is set to acquire a majority stake in Kotak General Insurance, marking the first major foreign investment in India's insurance sector in eight years. CCI has approved acquisition of 70% stake by Zurich in Kotak Mahindra Company.
- As announced in June 2023, Go Digit Life Insurance, in which both HDFC Bank and Axis Bank have bought stakes, plans to invest Rs. 500-600 crore (US$ 60.3-72.4 million) in the initial 18 months to start out as the country's 26th life insurer.
- As informed in September 2023, the UK and India have agreed to launch a partnership to boost cross-market investment by the insurance and pension sectors.
- In August 2023, Tata AIA launched a ULIP plan with benefits of critical illness cover - Tata AIA Pro Fit.
- With the introduction of new private sector companies, the insurance sector in India gained momentum in the year 2000.
- India allowed private companies in insurance sector in 2000, setting a limit on FDI to 26%, which was increased to 49% in 2014 and further increased to 74% in the Union Budget (Feb’21).
- The market share of private sector companies in the non-life insurance market rose from 15% in FY04 to 49.3% in FY21.
- Private insurers like HDFC, ICICI and SBI have been some tough competitors for providing life as well as non-life products to the insurance sector in India.
- The IPO of Life Insurance Corporation (LIC) of India was the largest IPO ever in India and the sixth biggest IPO globally of 2022. As of November 2022, listing of LIC accounted for more than a third of resources mobilised in the primary equity market until November 2022.
- Insurance market in India is expected reach US$ 222 billion by 2026.
- Robotic Process Automation (RPA) and AI will occupy center stage in insurance, driven by newer data channels, better data processing capabilities and advancements in AI algorithms.
- Bots will become mainstream in both the front and back-office to automate policy servicing and claims management for faster and more personalized customer service.
- Insurers can now launch new health insurance products without IRDAI’s nod. Earlier the flexibility was given for group insurance products but now retail products have also come under the new norms.
- The insurance industry is expected to use this opportunity for introduction of customized and innovative products, expansion of the choices available to the policyholders in order to address the dynamic needs of the market, which will further help in enhancing the insurance penetration in India.
- Bajaj Allianz Life Insurance, a private life insurer, has entered into a strategic partnership with City Union Bank, one of the oldest private sector banks in India. This partnership will help the private life insurer offer a wide array of life insurance solutions to the bank’s existing and future customers, across their 727 branches.
- In October 2022, Policybazaar's PBPartners launches its mobile app to facilitate the ease of insurance business for its advisors digitize their insurance business.
- Canara HSBC Life Insurance launched its ‘Canara HSBC Life Insurance App’ on the 75th Independence Day of India. The app, available on android, iOS devices and web portal, offers access to policy details, the option to receive timely alerts, pay the premium, and track fund value, among others.
- ICICI Lombard and Airtel Payments bank have entered into a partnership for providing cyber insurance in February 2022.
Government Initiatives
The Government of India has taken number of initiatives to boost the insurance industry. Some of them are as follows:
- The Indian government has increased the Foreign Direct Investment (FDI) limit in insurance companies from 74% to 100%, enabling complete foreign ownership. This strategic decision is intended to attract additional capital into the long-term, capital-intensive insurance sector, ensuring that insurers invest all collected premiums within the country.
- The Union Cabinet has sanctioned the extension of the Pradhan Mantri Fasal Bima Yojana and the Restructured Weather-Based Crop Insurance Scheme until FY26, with a total budget allocation of Rs. 69,515 crore (US$ 8.06 billion).
- The Interim Budget for 2024-25 aims to enhance value addition in agriculture and boost farmers' income. It plans to increase investment in post-harvest activities, provide financial aid to 11.8 crore farmers also offered crop insurance to 4 crore farmers, and promote self-reliance in oilseeds.
- The Union Budget 2023-24 has proposed to limit the income tax exemption on the proceeds of high value life insurance policies. Mooted as part of an emphasis on better targeting of tax concessions and exemptions, the proposal means that income from life insurance policies with an aggregate premium up to Rs. 5 lakh (US$ 6,075) will be exempt from taxation.
- The government’s flagship initiative for crop insurance, Pradhan Mantri Fasal Bima Yojana (PMFBY), has led to significant growth in the premium income for crop insurance.
- Ayushman Bharat (Pradhan Mantri Jan Arogya Yojana) (AB PMJAY) aims at providing a health cover of Rs. 5 lakh (US$ 6,075) per family per year for secondary and tertiary care hospitalization.
- Insurance cover for 44.6 crore persons under PM Suraksha Bima and PM Jeevan Jyoti Yojana was provided during FY23.
- In 2022, the Indian government plans to sell a 7% stake in LIC for Rs. 50,000 crore (US$ 6.62 billion). This is the largest Initial Public Offering (IPO) in India.
Road Ahead
The future looks promising for the life insurance industry with several changes in the regulatory framework which will lead to further changes in the way the industry conducts its business and engages with its customers. Going forward growing middle class, increasing awareness about the importance of insurance, and digital advancements, the sector is expected to expand further increasing life expectancy, favourable savings and greater employment in the private sector is expected to fuel demand for pension plans. Life insurance industry in the country is expected to increase by 14-15% annually for the next three to five years. The scope of IoT in Indian insurance market continues to go beyond telematics and customer risk assessment. Currently, there are 110+ InsurTech start-ups operating in India.
These startups are expected to provide a major boost to the industry and help increase India’s insurance penetration which plays a crucial role in the overall development of the country. In the past, the Indian government has played a crucial role in increasing the scope of the insurance sector through various policies and schemes. This trend will continue in the further through schemes like the Pradhan Mantri Fasal Bima Yojana (PMFBY) providing crop insurance and Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) providing life insurance coverage to the youth at an affordable price.
Schemes like these coupled with India’s demographic factors such as a growing middle class, young insurable population, and growing awareness of the need for protection and retirement planning will support the growth of the Indian insurance sector.
Note: Conversion rate used for January 2025 is Rs. 1 = US$ 0.012,
References: Media Reports, Press Releases, Press Information Bureau, Insurance Regulatory and Development Authority of India (IRDA), Crisil, Union Budget 2025-26
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