India’s life insurance sector is projected to grow at a compound annual growth rate (CAGR) of 14.5% from FY23 to FY35, making it one of the most promising segments in the country’s financial services space, according to a report by PL Capital.
Over the past two decades (FY05–25), the industry has grown at 11% CAGR, reaching Rs 1,203 billion in FY25. Recent GST exemptions are expected to improve affordability, enhance policy persistency, and deepen penetration, driving long-term growth, although they may create short-term profitability challenges due to lost input tax credits.
Despite steady expansion, India’s life insurance penetration remains low, at 2.8% of GDP in FY24, compared with a 5.6% average in developed markets. Similarly, insurance density stands at $70 per capita, far below the $3,182 in advanced economies—highlighting a multi-decade opportunity as households increasingly allocate savings to financial instruments.
The report points to several structural drivers for growth: the absence of social security nets, a growing middle class, rising life expectancy, and increasing financial awareness. These factors are expected to boost demand for protection and annuity products, currently underpenetrated in the market.
Historically, Unit Linked Insurance Plans (ULIPs) have dominated the product mix, supported by buoyant equity markets and tax benefits. However, as consumer preferences shift, the report anticipates a moderation in ULIP share in favor of non-linked offerings. Listed insurers saw ULIP share rise to 35–65% in FY25 from 16–55% in FY23.
The sector has successfully navigated multiple regulatory changes, including new surrender value guidelines for Expense-of-Management (EoM), positioning it for sustainable growth over the coming decade.
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