The Economic Survey 2025 has revealed that India's insurance sector is on a strong growth trajectory and is set to become the fastest-growing market among G20 nations in the next five years. Despite global economic challenges such as high inflation and geopolitical tensions, India’s insurance industry has demonstrated resilience and is projected to achieve significant growth in premiums, investment inflows, and government-backed initiatives.
India’s insurance sector has seen impressive growth in its premiums and has attracted notable investment. The total insurance premium for FY24 rose by 7.7%, reaching ₹11.2 lakh crore. Of this, life insurance premiums accounted for ₹8.3 lakh crore, while non-life insurance premiums grew by 7.7%, totaling ₹2.9 lakh crore. The sector has also been successful in drawing substantial foreign direct investment (FDI), with insurance receiving the highest share of FDI—62% of the total equity FDI inflows into the services sector.
Despite the promising growth, India’s insurance penetration remains relatively low compared to global standards. The total insurance penetration in FY24 decreased slightly from 4% in FY23 to 3.7%, indicating room for expansion. In terms of specific types of insurance, life insurance penetration decreased from 3% to 2.8%, while non-life insurance penetration remained stable at 1%.
However, there has been a steady rise in insurance density, which increased from $92 in FY23 to $95 in FY24. Notably, non-life insurance density rose from $22 to $25, indicating an increased awareness of and coverage for non-life insurance products.
A significant contributor to the growth of India’s insurance sector has been the government’s flagship program, the Pradhan Mantri Fasal Bima Yojana (PMFBY). This agricultural insurance scheme has seen increased participation from both state governments and insurers.
In FY25, 24 states and 15 insurers were involved, up from 20 states and 11 insurers in FY21. The number of enrolled farmers under PMFBY rose by 26% in FY24, reaching 4 crore, compared to 3.17 crore in FY23. Additionally, the insured area expanded by 19%, covering 600 lakh hectares in FY24, up from 500 lakh hectares in FY23.
Technological innovation is a key driver of growth in India’s insurance sector. Advancements in digital technologies are enabling insurers to streamline their operations and reach a larger consumer base. The expanding middle class and supportive regulatory measures are also expected to contribute to the sector’s continued expansion.
The shift towards protection and guaranteed-return savings products in the life insurance sector has helped cover 40% of Indian households, largely due to the widespread network of Life Insurance Corporation (LIC).
In the non-life insurance sector, there is optimism that the premium-to-GDP ratio will double in the next two decades, although it is expected to remain below the global average. This growth is anticipated to be driven by increased awareness and better product offerings for the urban and rural populations.
Despite the promising outlook, the insurance industry in India faces several challenges. Emerging risks, such as climate change, evolving customer expectations, and geopolitical uncertainties, are major concerns. In particular, increasing life expectancy and a growing elderly population present underwriting challenges. Moreover, issues like misselling, delayed claims, and cybersecurity threats are gaining importance in the sector.
To address these emerging risks, the insurance industry must innovate quickly, streamline processes, and strengthen risk management frameworks. Digitisation and simplification of insurance offerings are key strategies for tackling these challenges.
With increasing digitisation in the insurance sector, the risk of cybersecurity threats has escalated. To protect the sector from these risks, the Reserve Bank of India (RBI), in collaboration with the Insurance Regulatory and Development Authority of India (IRDAI) and the Pension Fund Regulatory and Development Authority (PFRDA), is enhancing cybersecurity measures. The regulatory framework now focuses on governance, technology risk management, cybersecurity operations, and third-party risk management to safeguard against evolving digital threats.
Conclusion
The Economic Survey 2025 paints a positive picture for India’s insurance sector. With continued growth in premiums, increasing government participation, technological innovations, and robust regulatory measures, the industry is poised for significant expansion in the coming years. Despite the challenges, the sector has the potential to become the fastest-growing insurance market in the G20, offering vast opportunities for both insurers and customers.