India’s Life Insurance Sector Set to Grow 10–12% Over the Next 3–5 Years: Report

New Delhi: India’s life insurance industry is projected to grow at a steady pace of 10–12% over the next three to five years, according to a new report by CareEdge Ratings. The growth will be fueled by product innovation, regulatory support, rapid digital adoption, improved customer service, and stronger distribution channels.

In June 2025, the industry recorded new business premiums worth Rs 41,117.1 crore, even as it grappled with the impact of revised surrender value regulations, weaker demand for credit life insurance, and a decline in group single premiums.

The annual premium equivalent (APE) for the month grew by 2.5%, a noticeable slowdown compared to 20% growth during the same period last year. However, over the longer term, the industry saw a compound annual growth rate (CAGR) of 11?tween June 2023 and June 2025, with private insurers outpacing the market at 15.4?GR, the report noted.

“The first quarter is typically a low-activity period for the life insurance sector, as most retail policy purchases happen at the end of the fiscal year in a last-minute rush,” said Saurabh Bhalerao, Associate Director at CareEdge Ratings.

In Q1 FY26, the industry witnessed quarter-on-quarter growth of 4.3%, a sharp contrast to the 22.9% growth in the same quarter last year. This was primarily due to subdued consumer demand and the revised surrender value guidelines that came into effect from October 1, 2024.

Both LIC and private insurers showed growth in individual single and non-single premium segments, suggesting effective distribution strategies and a shift toward higher-value policies in response to the regulatory changes.

The growth in June was largely driven by individual and yearly group insurance businesses, with an expected emphasis on the agency channel, supported by banks’ increasing efforts in deposit mobilisation.

Sanjay Agarwal, Senior Director at CareEdge Ratings, added that the proposed Insurance Amendment Act could boost market penetration by making it easier for new players to enter the sector.

Looking ahead, a gradual recovery is anticipated in FY26, bolstered by private insurers expanding into underserved regions and the upcoming launch of the government’s Bima Trinity initiative.

With inputs from IANS