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What is the story about?
As 2025 draws to a close, India’s insurance sector is ending the year with steady premium growth, a sharper focus on protection products and renewed momentum from regulatory reforms—most notably the removal of GST on individual life and health insurance premiums.
While affordability gains lifted retail demand, insurers continued to navigate margin pressure from rising medical inflation and intense competition in key segments.
Premium growth steady, profitability under pressure in select segments
Life and general insurers recorded consistent premium growth through 2025, supported by rising participation in health, protection and group products.
General insurance continued to grow at double-digit rates, led by health, motor and commercial lines, while life insurance benefited from group business expansion and growth in retail savings products.
However, profitability trends remained mixed.
“We continued to see high price competition in the motor segment and elevated claims ratios in health due to high medical inflation,” said Vaibhav Goyal, MD & CEO, Navi General Insurance Limited.
He added that while the GST exemption on retail health insurance reduced costs for customers and boosted demand, insurers faced internal cost pressures due to the loss of input tax credits.
According to industry executives, improved underwriting discipline and stronger claims management helped stabilise overall profitability, even as cost headwinds persisted in health insurance.
Affordability and awareness drive demand
Rising consumer awareness and improved affordability emerged as the key structural drivers of insurance demand in 2025.
“The memory of the pandemic, coupled with rising medical inflation, has cemented the need for health and protection,” Goyal said.
He noted that the GST exemption acted as a major affordability lever, making essential protection nearly 18% cheaper overnight.
The demand impact was visible across geographies, with insurers and brokers reporting higher enquiries and conversion rates, particularly in the retail individual segment.
“The retail health insurance segment is highly price sensitive. GST 2.0 gave a clear boost to demand,” Goyal said.
Shift towards higher cover and add-ons
The affordability reset also changed buying behaviour. Customers opted for higher sum-insured policies and additional riders that they had earlier deferred due to cost concerns.
“One of the most meaningful shifts this year has been the removal of GST,” said Amit Chhabra, Chief Business Officer – General Insurance, Policybazaar. “Families are purchasing protection products with greater confidence and choosing riders and add-ons such as OPD covers and higher sum-insured plans. The response has been particularly strong in Tier-2, Tier-3 and rural markets.”
In life insurance, protection preferences also evolved.
“An increasing number of first-time buyers are choosing ₹2 crore sum assured term plans,” said Vivek Jain, Chief Business Officer – Life Insurance, Policybazaar.
He added that riders such as critical illness and waiver of premium saw strong uptake as customers sought more holistic coverage.
Regulatory changes reshape insurer strategies
Regulatory reforms in 2025 extended beyond GST relief.
The Insurance Regulatory and Development Authority of India (IRDAI) sharpened its focus on customer-centricity, transparency and affordability, prompting insurers to invest in simplified products, digital KYC, standardised processes and enhanced fraud monitoring.
“Insurers have invested significantly in all three areas, increasing trust across the insurance ecosystem,” Goyal said, while noting that rising medical inflation remains a shared challenge for insurers, healthcare providers and policymakers.
According to Arun Ramamurthy, Co-founder, Staywell.Health, the elimination of GST on individual life and health premiums fundamentally altered product economics and expanded access.
He added that regulatory emphasis on digital governance and fraud monitoring is pushing insurers toward more efficient operations and better policyholder experiences.
Digital onboarding becomes mainstream; embedded insurance scales up
Digital transformation accelerated in 2025, with digital onboarding shifting from a value-add to a baseline expectation.
“In the age of 10-minute delivery, seamless digital KYC and payments are hygiene,” Goyal said, adding that insurers are balancing speed with compliance and risk management.
Investments in analytics and AI-based tools also strengthened fraud detection, particularly in health and motor claims. As insurer data becomes more structured, executives expect further gains in claims accuracy and leakage control.
Embedded insurance gained scale during the year, supported by partnerships with fintech, e-commerce and mobility platforms.
“Embedded insurance has moved from pilots to a meaningful distribution channel,” said Rajendra Upadhyaya, Chief Growth Officer, Choice Insurance Broking, noting steady growth in micro-covers for travel, gadgets and mobility.
Outlook 2026: Opportunities tempered by structural risks
Looking ahead, insurers see multiple growth opportunities in 2026.
These include greater use of Gen-AI to reduce operating costs, wider adoption of embedded insurance, OPD- and wellness-led health products, and deeper penetration into Tier-2, Tier-3 and rural markets through digital public infrastructure such as Bima Sugam and Bima Vahak.
“Common hospital empanelment and efforts to reduce healthcare costs will be critical to fully leverage the benefits of GST 2.0,” Goyal said.
However, risks remain pronounced. Rising medical inflation continues to be the biggest concern for health insurers, while a high number of uninsured vehicles poses a structural risk to the motor insurance pool. Intensifying competition could also pressure pricing discipline, industry executives cautioned.
Data protection compliance under the DPDP Act and increasing climate-related loss events are additional risks insurers are preparing for as they enter 2026.
As the year closes, the sector appears better positioned to expand coverage and trust. Sustaining that momentum in 2026, however, will depend on how effectively insurers balance growth ambitions with cost control, underwriting discipline and execution in an increasingly digital insurance landscape.
ALSO READ: Insurance Amendment Bill passed: What the changes mean for policyholders
While affordability gains lifted retail demand, insurers continued to navigate margin pressure from rising medical inflation and intense competition in key segments.
Premium growth steady, profitability under pressure in select segments
Life and general insurers recorded consistent premium growth through 2025, supported by rising participation in health, protection and group products.
General insurance continued to grow at double-digit rates, led by health, motor and commercial lines, while life insurance benefited from group business expansion and growth in retail savings products.
However, profitability trends remained mixed.
“We continued to see high price competition in the motor segment and elevated claims ratios in health due to high medical inflation,” said Vaibhav Goyal, MD & CEO, Navi General Insurance Limited.
He added that while the GST exemption on retail health insurance reduced costs for customers and boosted demand, insurers faced internal cost pressures due to the loss of input tax credits.
According to industry executives, improved underwriting discipline and stronger claims management helped stabilise overall profitability, even as cost headwinds persisted in health insurance.
Affordability and awareness drive demand
Rising consumer awareness and improved affordability emerged as the key structural drivers of insurance demand in 2025.
“The memory of the pandemic, coupled with rising medical inflation, has cemented the need for health and protection,” Goyal said.
He noted that the GST exemption acted as a major affordability lever, making essential protection nearly 18% cheaper overnight.
The demand impact was visible across geographies, with insurers and brokers reporting higher enquiries and conversion rates, particularly in the retail individual segment.
“The retail health insurance segment is highly price sensitive. GST 2.0 gave a clear boost to demand,” Goyal said.
According to Anuj Tyagi, Managing Director & CEO, HDFC ERGO General Insurance, 2025 marked a year of customer-centric reforms. He cited GST exemption for individual health insurance, initiatives to simplify policies and the recent insurance amendment bill aimed at protecting policyholder interests and deepening penetration in remote geographies.
“A notable activity during the year was the industry-wide awareness campaign ‘Acha Kiya Insurance Liya’ by the General Insurance Council of India, where insurers
collaborated to nudge citizens on the importance of insurance,” Tyagi said.
Shift towards higher cover and add-ons
The affordability reset also changed buying behaviour. Customers opted for higher sum-insured policies and additional riders that they had earlier deferred due to cost concerns.
“One of the most meaningful shifts this year has been the removal of GST,” said Amit Chhabra, Chief Business Officer – General Insurance, Policybazaar. “Families are purchasing protection products with greater confidence and choosing riders and add-ons such as OPD covers and higher sum-insured plans. The response has been particularly strong in Tier-2, Tier-3 and rural markets.”
In life insurance, protection preferences also evolved.
“An increasing number of first-time buyers are choosing ₹2 crore sum assured term plans,” said Vivek Jain, Chief Business Officer – Life Insurance, Policybazaar.
He added that riders such as critical illness and waiver of premium saw strong uptake as customers sought more holistic coverage.
Regulatory changes reshape insurer strategies
Regulatory reforms in 2025 extended beyond GST relief.
The Insurance Regulatory and Development Authority of India (IRDAI) sharpened its focus on customer-centricity, transparency and affordability, prompting insurers to invest in simplified products, digital KYC, standardised processes and enhanced fraud monitoring.
“Insurers have invested significantly in all three areas, increasing trust across the insurance ecosystem,” Goyal said, while noting that rising medical inflation remains a shared challenge for insurers, healthcare providers and policymakers.
According to Arun Ramamurthy, Co-founder, Staywell.Health, the elimination of GST on individual life and health premiums fundamentally altered product economics and expanded access.
He added that regulatory emphasis on digital governance and fraud monitoring is pushing insurers toward more efficient operations and better policyholder experiences.
Digital onboarding becomes mainstream; embedded insurance scales up
Digital transformation accelerated in 2025, with digital onboarding shifting from a value-add to a baseline expectation.
“In the age of 10-minute delivery, seamless digital KYC and payments are hygiene,” Goyal said, adding that insurers are balancing speed with compliance and risk management.
Investments in analytics and AI-based tools also strengthened fraud detection, particularly in health and motor claims. As insurer data becomes more structured, executives expect further gains in claims accuracy and leakage control.
Embedded insurance gained scale during the year, supported by partnerships with fintech, e-commerce and mobility platforms.
“Embedded insurance has moved from pilots to a meaningful distribution channel,” said Rajendra Upadhyaya, Chief Growth Officer, Choice Insurance Broking, noting steady growth in micro-covers for travel, gadgets and mobility.
Outlook 2026: Opportunities tempered by structural risks
Looking ahead, insurers see multiple growth opportunities in 2026.
These include greater use of Gen-AI to reduce operating costs, wider adoption of embedded insurance, OPD- and wellness-led health products, and deeper penetration into Tier-2, Tier-3 and rural markets through digital public infrastructure such as Bima Sugam and Bima Vahak.
“Common hospital empanelment and efforts to reduce healthcare costs will be critical to fully leverage the benefits of GST 2.0,” Goyal said.
However, risks remain pronounced. Rising medical inflation continues to be the biggest concern for health insurers, while a high number of uninsured vehicles poses a structural risk to the motor insurance pool. Intensifying competition could also pressure pricing discipline, industry executives cautioned.
Data protection compliance under the DPDP Act and increasing climate-related loss events are additional risks insurers are preparing for as they enter 2026.
As the year closes, the sector appears better positioned to expand coverage and trust. Sustaining that momentum in 2026, however, will depend on how effectively insurers balance growth ambitions with cost control, underwriting discipline and execution in an increasingly digital insurance landscape.
ALSO READ: Insurance Amendment Bill passed: What the changes mean for policyholders
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