Active individual policies stayed near 330 million from FY 2017 to FY 2025.
India’s insurance industry is failing to keep pace with the nation’s rapid gains in bank account ownership and digital infrastructure.
The overall insurance penetration in India stands at 3.7% of gross domestic product (GDP), roughly half the global average of 7.3%, according to a report published by consultancy firm McKinsey & Company.
Non-life insurance lags furthest behind, with a penetration rate of 1.0% compared to the global benchmark of more than 4.0%. Life insurance penetration sits at 2.7%, close to the global average of 3.0%.
Whilst adult bank-account ownership increased from 53% in 2014 to 89% in 2025, active individual life insurance policies remained flat at roughly 330 million between fiscal year 2017 (FY 2017) and FY 2025.
Recent growth in life insurance revenue has been driven by higher policy values rather than wider coverage. Individual new-business premiums grew at a 10% compound annual growth rate (CAGR) between FY 2022 and FY 2025, but individual policy volumes fell by approximately 2% annually during the same period.
Value of New Business margins amongst the top four private life insurers dropped by 3 to 4 percentage points over FY 2022 to 2026.
Demand is also shifting toward market-linked options. Linked new-business premiums grew at a 23% CAGR between FY 2022 and FY 2025, rising from 29% to 36% of the market share.
Health insurance has expanded as the primary driver of general insurance, accounting for roughly 38% of the general insurance market after growing at a 17% CAGR between FY 2022 and FY 2025.
The number of individuals covered by individual health policies grew from approximately 32 million in FY2017 to 60 million in FY 2025.
However, total health insurance coverage — including government schemes — reaches only 39% of the population.
Operational costs are outstripping revenue growth. Total operating expenses for private life insurers increased by approximately 20% annually between FY 2022 and FY 2025, exceeding the 14% growth in individual new-business premiums.
For the top five private general insurers, premium revenue per unit of employee expense fell by around 2.5% annually between FY 2022 and FY2026.
Under-served commercial sectors remain a significant gap. India’s 65 million micro, small, and medium enterprises (MSMEs) generate roughly 31% of GDP, yet they represent only about 10% of the institutional insurance pool.
McKinsey noted that upcoming developments — including the introduction of a 100% foreign direct investment (FDI) allowance and wider adoption of artificial intelligence in underwriting, claims, and sales — are likely to increase market competition and alter insurer operations moving forward.