India’s life insurance sector is set to maintain a steady expansion in FY26, helped by supportive economic conditions, a stable regulatory environment and wider distribution reach. However, premium growth may remain uneven in the near term as insurers continue to adjust product structures and taxation norms, according to an industry assessment.
The life insurance market is expected to grow at 8 to 11% in FY26, broadly tracking nominal GDP growth. Additional momentum is likely to come from protection products, non participating savings and annuities, as noted by CareEdge Ratings. While short term volatility may persist, analysts expect medium term prospects to improve as recent regulatory changes begin to enhance affordability, policy continuity and customer access.
Life insurance continues to account for nearly three fourths of total insurance premiums in FY25, with overall premiums at about Rs 8.85 lakh crore. Despite steady expansion over the past 20 years, the sector remains underpenetrated, with insurance penetration at 2.8% and insurance density at $70, far below global and Asian levels. This gap is expected to support long term growth as incomes rise and awareness improves. Although coverage has expanded mainly through group and credit linked policies, low average cover and limited pension reach still leave key risks insufficiently addressed, pushing future growth towards better quality protection and retirement solutions.
Regulatory stability is seen as a key positive for FY26. Measures such as revised surrender value norms, GST exemption on individual life policies, risk based solvency norms, the rollout of Bima Sugam and the upcoming IFRS 17 transition are expected to strengthen transparency and governance. New business premiums are projected to recover gradually after slowing in FY24 and FY25, with growth expected in the high single digits. Group insurance is likely to remain dominant, while individual premiums gain traction through innovation, wider reach and better efficiency. Bancassurance and digital channels are expected to grow further, even as Life Insurance Corporation of India retains leadership and private insurers expand their share through targeted strategies.
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