The Rise of India’s Insurance Industry

The pandemic has highlighted the role insurance plays in safeguarding our well-being and securing our future. Even beyond the pandemic effect, the insurance industry has experienced a surge driven by evolving demographics and a thriving economy. India’s young population, increasing disposable incomes, growing financial awareness, and robust regulatory support are all contributing to the sector’s growth. As per the Insurance Regulatory and Development Authority of India (IRDAI), India’s insurance industry is projected to reach $222 billion by 2026 and become the sixth-largest insurance market globally, surpassing countries like Germany, Canada, Italy, and South Korea. 

Insurance segments and market size 

The insurance market can be divided into two major segments: life and non-life insurance. Non-life insurance companies provide services such as motor insurance, health insurance, crop insurance etc. The insurance industry in India includes both private and public players and has 58 insurance companies, including 34 non-life insurers (25 general insurers, 7 standalone health, and 2 specialised insurers).

• Life Insurance Market: Since life insurance penetration accounts for less than 5% of the GDP in India, there’s a huge untapped market for both existing and new players. The life insurance industry in India is projected to achieve significant growth, with premiums expected to reach ₹24 lakh crore ($317.98 billion) by fiscal year 2030-31. 

• Non-Life Insurance Market: Despite India’s vast population, its non-life insurance penetration stands at only 1.0%. However, the country ranks as the 4^th largest general insurance market in Asia and the 14^th largest globally.

In FY23, the non-life insurance industry has grown by 16.4%, compared to 11.1% in the same period last year, reaching ₹2.5 lakh crores. This growth has continued to be driven by health (especially the group segment), and motor insurance. The opening-up of economies, increased trade activity, and a booming automotive industry are expected to further boost the demand for motor and health insurance, which will benefit general insurance companies.

Growth drivers of the industry

• Technology – The insurance industry has undergone a remarkable transformation from its traditional offline structure which was dominated by corporate agents, brokers, and banks. Rapid digitisation, product innovations, and progressive regulations have revolutionised the way consumers access insurance products. The advent of user-friendly mobile apps has simplified the insurance-buying process, enhancing customer experience and opening up multiple distribution channels. Today, numerous fin-tech startups and large insurance companies offer products through apps and websites, which has greatly reduced the hassle of obtaining insurance.

• Growing personal incomes – As India’s economy continues to grow, there is a corresponding increase in personal disposable incomes of individuals. With more money available for savings and investments, people are increasingly looking for avenues to protect their financial future through instruments like insurance. Additionally, as financial awareness grows, people become increasingly conscious of the need to protect their assets and financial well-being. This has led to a rise in insurance products such as health insurance, crop insurance, and motor insurance. 

• Government support – Government support has played a significant role in bolstering the insurance industry in India. One notable initiative is the ‘Ayushman Bharat PMJAY SEHAT’ scheme, which stands as the world’s largest health insurance/assurance program fully financed by the government. This scheme offers comprehensive coverage of ₹500,000 per family per year, providing secondary and tertiary care hospitalisation across both public and private hospitals. Additionally, in Budget FY 2023-24, there was a proposal to limit income tax exemption on high-value life insurance policies. According to the proposal, income from life insurance policies with an aggregate premium up to Rs. 5 lakh will be exempt from taxation. These government initiatives have helped to promote insurance penetration and financial inclusion in the country.

With a young and dynamic population, growing financial literacy, and a thriving economy, the insurance industry is poised for remarkable growth and is set to play a crucial role in securing the financial future of millions of Indians. 

The Insurance Tracker is a smallcase which provides exposure to listed companies in India’s thriving insurance sector. 

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