Why in News?

• India’s insurance industry is poised for substantial expansion, with Gross Written Premiums (GWP) expected to grow by 123% by 2030.
• This development reflects changing consumer behavior, increasing insurance awareness, and structural transformations in both retail and institutional segments.
• The insights are based on a joint report by the Insurance Brokers Association of India (IBAI) and McKinsey & Company, supported by the IBAI Insurance Insights Survey of 2,500 retail customers.

What’s in Today’s Article?

• Growth Trajectory of India’s Insurance Sector
• Retail Segment - Divergent Needs and Behaviors
• Institutional Segment - Emerging Growth Frontiers
• Policy and Regulatory Implications
• India’s Insurance Sector

Growth Trajectory of India’s Insurance Sector:

• Rapid increase in GWP:
  • GWP refers to the total amount of premium revenue an insurer collects from policies issued during a specific period, before any deductions for reinsurance or other adjustments.
  • GWP to grow from ₹11.2 lakh crore in 2024 to ₹25 lakh crore by 2030.
  • This reflects a 123% increase in total insurance premium volume.
• Rising insurance penetration: Insurance penetration (ratio of total insurance premiums collected by insurance companies to a country's GDP) to improve from 3.7% (2024) to 5% by 2030, closing the gap with the global average of 6.8% (2023).
• Past performance: Between FY 2020 and FY 2024, total premiums rose from ₹7.8 lakh crore to ₹11.2 lakh crore, showing strong double-digit growth.

Retail Segment - Divergent Needs and Behaviors:

• Dominance of life insurance: Retail GWP is expected to reach ₹21 lakh crore by 2030, with over 90% from life insurance.
• Customer pyramid insights: 65% of opportunity lies at the two ends -
  • UHNI and HNI (Ultra/High Net-Worth Individuals) with assets over ₹8.5 crore.
  • Mass-market customers (individuals or businesses with relatively similar needs and purchasing power) with basic or first-time insurance needs.
• Insurance awareness vs. actual coverage:
  • 60% of HNI/UHNI customers believe ideal cover is 10 times of their salary, but only 30% actually hold such coverage.
  • Intent-coverage gap (a period during which an individual lacks insurance coverage) is a major structural issue.
• Influence on purchase decisions:
  • 70% HNI/UHNI: Rely on trusted advisors.
  • 45% mass-market: Influenced by family and friends.
• Claims experience:
  • 50% of HNI+ customers considered switching insurers due to poor claims service.
  • 55% SMEs faced claim rejections.
  • 75% need help with claims paperwork.

Institutional Segment - Emerging Growth Frontiers:

• Non-life insurance dominance: Institutional GWP to grow 3 times to ₹2.8 lakh crore by 2030.
• SME segment potential:
  • Currently contributes approximately 10%, but expected to grow fastest.
  • Half of SME opportunities concentrated in 17 cities and 10 capital-intensive industries: textiles, automotives, pharmaceuticals, industrial goods, etc.
• Structural barriers: Low intent to purchase due to -
  • Perceived non-necessity.
  • Lack of risk-management knowledge.
  • Margin pressures.
• Role of regulatory push:
  • 70% SMEs purchase insurance due to compliance, not voluntary need.
  • Seek advisory support, sector-specific products, and handholding in claims.

Policy and Regulatory Implications:

• Bridging the insurance gap can support financial resilience and economic stability.
• The sector offers scope for regulatory reforms, digital outreach, and inclusive insurance models.
• Focus needed on -
  • Customer-centric innovations.
  • Simplified claims management.
  • Insurance literacy, especially among SMEs and low-income segments.

India’s Insurance Sector:

• Insurance in India (covers both public and private sector organisations) is listed in the Seventh Schedule of India's Constitution as a Union List subject, meaning it can only be legislated by the Central government.
• The primary regulator for insurance in India is the Insurance Regulatory and Development Authority of India (IRDAI) which is a statutory body established in 1999.
• India is the fifth largest life insurance market in the world's emerging insurance markets, growing at a rate of 32-34% each year.
• Over the past nine years, the insurance sector has attracted substantial foreign direct investment amounting to nearly Rs. 54,000 crore (US$ 6.5 billion), driven by the government's progressive relaxation of overseas capital flow regulations.
  • FDI sectoral cap in the insurance sector has been revised from 49% to 74% under the automatic route.
  • The Union Budget 2025 also announced the further increase of FDI sectoral cap for the insurance sector from 74% to 100%.
  • This enhanced limit will be available for those companies, which invest the entire premium in India.
• The insurance industry of India has 57 insurance companies - 24 are in the life insurance business, while 34 are non-life insurers.
• Among the life insurers, Life Insurance Corporation (LIC) is the sole public sector company. There are six public sector insurers in the non-life insurance segment.
• In addition to these, there is a sole national re-insurer, namely General Insurance Corporation of India (GIC Re).