India’s insurance market is among the fastest-growing globally. The industry comprises both private and public companies, along with new digital insurance providers offering quick and affordable services to customers. With a large investment portfolio and extensive coverage of personal and business risks, the sector plays a crucial role in maintaining financial stability and supporting economic growth.
This article explores the current state of India’s insurance sector, the challenges it faces, and its future outlook.
Current State of India’s Insurance Sector
According to Swiss Re, India is currently ranked tenth and is projected to become the fastest-growing insurance market within the G20 over the next five years. An IBEF report suggests that the Indian insurance market is expected to reach USD 222 billion by 2026.
However, as per IRDAI, in 2023-24, India’s insurance penetration — measured as the ratio of annual premium to GDP — declined to 3.7% from 4% in FY23.
India’s insurance penetration dipped to 3.7% in FY24, marking a second consecutive decline post-COVID-19 pandemic peak.
Insurance density, another key indicator of sector growth, showed a modest rise, increasing from USD 92 in FY23 to USD 95 in FY24. It is measured as the ratio of premiums collected by insurance companies to the country’s population.
India’s insurance density rose from $92 in FY23 to $95 in FY24, indicating steady sector growth.
Life Insurance Segment
Insurance penetration in the life insurance industry saw a marginal decline from 3% to 2.8% in 2023-24, while life insurance density remained stable at USD 70, according to IRDAI.
India’s life insurance industry recorded a 1.93% growth in new business premiums in 2023-24.
Non-Life Insurance Segment
The insurance penetration for the non-life insurance industry remained unchanged at 1% in 2023-24, while density increased from USD 22 to USD 25, as per IRDAI.
In 2023-24, the non-life insurance industry reported a total direct premium of around Rs 2.90 lakh crore, reflecting a 12.76% growth compared to the previous year. The contribution of public sector companies increased by 8.88%, from Rs 82,891 crore in 2022-23 to Rs 90,252 crore in 2023-24. Meanwhile, private sector insurers, including standalone health insurers, underwrote Rs 1.88 lakh crore, up from Rs 1.58 lakh crore in the previous fiscal year.
India’s non-life insurance industry saw a 12.76% growth in 2023-24, with total direct premiums reaching approximately Rs 2.90 lakh crore.
Challenges in the Insurance Sector
The insurance sector has significant growth potential but faces several challenges.
Exposure to Natural Calamities: India is geographically prone to natural disasters, including cyclones, earthquakes, floods, and droughts. About 93% of such risks in India remain uninsured.
Cyber Threats: The adoption of digital KYC processes, automated underwriting, and online platforms has increased risks like identity theft, data breaches, and fraud.
Offline and Cross-Selling Issues: Unregulated distribution methods such as bancassurance, call centres, and agency models have led to cases of mis-selling, biased advice, and data privacy concerns. To address these issues, IRDAI has extended the free-look period for new life and individual health insurance policies from 15 to 30 days, effective April 1, 2024.
Low Awareness and Understanding of Insurance Products: Many individuals, especially in rural and semi-urban areas, lack awareness of life insurance and its benefits. The complexity of insurance terms often discourages potential buyers.
Stocks to Add to Your Watchlist
Below are some insurance companies that may benefit from the industry’s growth:
Government Initiatives
FDI Investment: In Union Budget 2025, the Indian government increased the FDI limit in insurance companies from 74% to 100%, aiming to boost capital inflows while ensuring that insurers invest all collected premiums within India.
7-Member Committee: IRDAI has formed a high-powered committee to review aspects of the Insurance Act, 1938, and recommend changes.
Bima-ASBA: IRDAI has introduced a new payment mechanism via UPI, allowing policyholders to block funds for premiums until policy issuance. This aims to prevent unauthorised deductions and refund delays.
Bima Sugam: A revolutionary digital platform, Bima Sugam, is expected to launch its first phase by April 2025. It will serve as a one-stop destination for purchasing insurance policies, with web aggregators, brokers, agents, and banks acting as facilitators.
Ayushman Bharat PMJAY SEHAT Scheme: The world’s largest government-financed health insurance program offers coverage of Rs 5 lakh (USD 6,074) per family annually for hospitalisations across public and private hospitals in India.
FDI Limit: On December 12, 2025, the government increased the FDI limit in the insurance sector from 74% to 100% and announced several structural reforms to strengthen the industry.
What’s Next?
India’s insurance market is expected to be the fastest-growing within the G20 over the next five years, with premium volumes rising by 7.3% annually, driven by macroeconomic growth, digital advancements, and a supportive regulatory environment, according to Swiss Re.
Life insurance, which accounts for 74% of total premiums, is projected to grow at 6.9% annually from 2025 to 2029, while non-life insurance is expected to expand at 7.3% annually, up from 5.7% in 2024. Additionally, the government’s decision to allow 100% FDI is likely to attract new players, fostering competition, innovation, and overall market expansion.
*The companies mentioned in the article are for information purposes only. This is not an investment advice.
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