India’s life insurance sector is gearing up for exciting times ahead. Experts predict it will grow at a robust compound annual growth rate (CAGR) of 14.5 percent from FY23 to FY35, positioning it as a top performer in the country’s financial services industry, according to a new report from PL Capital.
Over the last 20 years, from FY05 to FY25, the Indian life insurance market has expanded at a steady CAGR of 11 percent, reaching Rs 1,203 billion in FY25. This growth comes at a time when the government recently announced a GST exemption on life insurance premiums, which should make policies more affordable and boost customer loyalty. In turn, this could drive deeper penetration of life insurance in India and fuel long-term expansion.
That said, the exemption might bring short-term hurdles for insurers. Without access to input tax credits, companies could face profitability pressures in the near future.
Despite this progress, India’s life insurance penetration still lags far behind global standards. In FY24, it stood at just 2.8 percent of GDP, compared to the developed markets’ average of 5.6 percent. On insurance density, India clocks in at $70 per capita, a stark contrast to $3,182 in advanced economies. This wide gap signals huge potential for the life insurance industry in India over the coming decades, especially as more households shift savings into financial products.
With India’s nominal GDP expected to rise by 10.5 percent each year, and growing awareness about financial planning, life insurance is poised to become a key part of family finances. The report points to strong underlying drivers like limited social security, a booming middle class, and longer life expectancies. These factors will ramp up demand for protection plans and annuity products, which remain underexplored in the market right now.
Historically, Unit Linked Insurance Plans (ULIPs) have led the pack, thanks to strong stock markets and tax perks. But the tide is turning—experts foresee a dip in ULIP’s dominance as buyers lean toward simpler, non-linked insurance options. For listed insurers, ULIP’s share has already climbed to 35-65 percent in FY25, up from 16-55 percent in FY23.
The sector has also adapted to recent regulatory tweaks, such as updated surrender value rules and expense-of-management guidelines, helping it stay resilient amid changes. Overall, the future looks bright for life insurance growth in India, offering big opportunities for both consumers and companies.
Stay informed on all the latest news, real-time breaking news updates, and follow all the important headlines in world News on Latest NewsX. Follow us on social media Facebook, Twitter(X), Gettr and subscribe our Youtube Channel.
