Insuring India’s future: Can growth keep pace with affordability?

How well are we insured? Insurance has long been seen as something to think about later. But as risks grow - from health emergencies to financial uncertainties, more Indians are starting to view it as a basic need.

As of FY24, India’s insurance penetration stands at ~3.7% of GDP, with life insurance at ~2.8% and non-life at ~0.9%. This is further represented by the share of premiums collected as a percent of the overall GDP, where India significantly lags its peers.

Source: Allianz Research

This isn’t just a gap — it’s an opportunity. As per Allianz Research, Insurance is going to be one of the fastest-growing sectors in India over the next decade.

Source: Allianz Research

With rising financial literacy, smartphone access, and a regulatory push, India could soon close this distance. But as the market expands, it’s also confronting a growing challenge: how to make insurance affordable and accessible, especially as premiums rise.

Is it therefore any wonder that the insurance sector has attracted ₹54,000 crore ($6.5 billion) in FDI over the past nine years? India also makes up 35% of Asia-Pacific’s $3.7 billion Insurtech investment (tech-driven platforms offering insurance).

What makes up India’s insurance industry?

India’s insurance ecosystem is made up of three major segments - each serving a unique purpose:

• Life insurance: Think term plans, long-term protection for your loved ones.

• General insurance (Non-life): Covers medical bills, accidents, travel delays, property losses, and more.

• Reinsurance: This is where insurers get insured. India’s only national reinsurer, GIC Re, plays a crucial role behind the scenes.

Now, how much are Indians actually spending on insurance? Let’s look at the growing insurance density (i.e., premiums per capita) from FY15 to FY24. It tells us how much, on average, each citizen spends on life and non-life insurance annually:

Source: IBEF

The friction underneath

Health insurance premiums in India are increasing - but how sharp is the rise? As per Policybazaar, 95% of customers saw premium hikes below 15% over the past decade. But a deeper look reveals that 10% faced surges above 30%, though half of them managed costs by shifting to more value-for-money plans.

At the same time, 53% saw hikes of less than 10% and continued their current policies. Looking at average yearly increases (measured as CAGR):

• 52% saw 5–10% growth
• 38% faced 10–15%
• 5% had below 5%
• A few saw 15–30%

But premium hikes are part of a larger problem - healthcare inflation. As per the ACKO India Health Insurance Index 2024, costs are rising 14% annually, with 62% of expenses paid out-of-pocket and 23% of hospital bills funded through borrowings.

Now consider senior citizens. With 138 million elderly, 40% live with disabilities and 75% suffer from chronic illnesses. Due to mounting complaints about soaring premiums, some even saw 100% hikes.

How are insurers responding?

Insurers are rethinking their approach to help customers deal with rising premiums.

“To help customers cope with inflation, insurers are introducing features like cumulative bonuses… up to seven or ten times over time,” says Amit Chhabra, CBO, Policybazaar. He explained - “A 41-year-old in Delhi could see ₹10L coverage grow to ₹70L over 5 years, while premiums rise from ₹27,276 (2024) to ₹36,700 (2029). The cost per ₹1L of coverage drops from ₹2,728 to ₹524.”

Another sign that things are shifting? Renewal rates for health insurance have increased by nearly 10% over the past two years. This suggests that more policyholders are choosing to continue their plans, even with higher costs — a sign that insurers’ efforts may be paying off.

On the regulatory side, IRDAI stepped in to protect vulnerable sections like senior citizens. As of January 2025, it has capped premium increases at 10% per annum for seniors. Any higher hikes or product withdrawals must get regulator approval. “The IRDAI move brings relief, especially for seniors hit with 50–60% hikes. Reducing the 18% GST on premiums could further ease the burden,” says Shilpa Arora, Co-founder, Insurance Samadhan.

Key players

The Indian insurance ecosystem has a mix of public giants and a growing number of private players — across life, non-life, and reinsurance.

• Life Insurance: There are four life insurers in the public sector and several private ones — but LIC continues to dominate, holding 59% of the market share in FY24. It’s not just a legacy name, it’s still very much a market mover.

Source: IBEF

The above snapshot highlights that LIC, the sole public sector insurer, leads the market share by 59% in FY24.

• Non-Life Insurance: This space is broader, with 34 companies operating, including 6 public sector players. The non-life segment spans everything from motor to health and travel. The ecosystem is also supported by a wide network of agents, brokers, surveyors, and third-party administrators (TPAs) that process health claims.

Source: IBEF

• Reinsurance: In the background, GIC Re plays a quiet but critical role as India’s sole national reinsurer, providing the financial safety net for insurers themselves. It continued to maintain its leadership in the domestic market which contributed 69% of the premium income for FY2022-23.

Final thoughts

So, where does India’s insurance industry go from here? In a world of climate threats, cyber risks, and rising life expectancy, the answer lies in bold moves. What if insurers launched multigenerational products that fit Indian families? Or embraced agile teams and smarter tech to boost profitability?