The year 2025 marked a turning point for India’s insurance sector, with a series of regulatory, structural and digital reforms reshaping life, health and general
insurance businesses. From GST rationalisation on insurance premiums and the Insurance Amendment Bill to surrender value reforms, AI-led claims processing and digital public infrastructure platforms such as NHCX and Bima Sugam, the industry witnessed what experts describe as a 'reset year'. As India enters 2026, the central question is whether these reforms will finally translate into higher insurance penetration, improved affordability and stronger trust among policyholders, or whether deep-rooted challenges around profitability and consumer intent will continue. This was discussed in a special edition of Insurance Mantra, Insurance Outlook 2026, featuring senior industry leaders Pallavi Malani, Managing Director and Partner, Insurance Practice India, Boston Consulting Group; Sheila Anand, Whole-time Director and CEO, Narayana Health; and Pankaj Gupta, MD and CEO, Pramerica Life Insurance.
2025: A year of recalibration
According to Pallavi Malani of BCG, 2025 sent a clear signal that insurance is no longer an optional financial product but a core pillar of social security. She highlighted that both life and general insurers delivered market capitalisation returns of around fourteen to fifteen per cent between April and December, outperforming benchmark indices such as the Sensex and Bank Nifty.However, she cautioned that profitability remains a key concern. While consumer awareness has improved, intent to purchase insurance continues to lag. “Awareness has been created, but converting that awareness into trust and actual buying intent is the real challenge,” Malani said.
Life insurance: Transparency and long-term trust
For life insurers, the introduction of new surrender value norms was among the most significant developments of 2025. Pankaj Gupta of Pramerica Life described the changes as part of a broader regulatory push towards long-term growth, ease of doing business and policyholder protection.He said the new guidelines enhance transparency and trust, but also require insurers to recalibrate their business models. Greater focus on quality of sales, alignment between customers, distributors and insurers and encouraging long-term policy retention will be critical going forward.
Gupta added that the shift towards protection and non-participating products is likely to continue in 2026, supported by GST reforms and demand for predictable long-term returns amid fluctuating interest rates.
Health insurance: Digital push and collaboration
From a health insurance perspective, Sheila Anand of Narayana Health described 2025 as both challenging and transformative. The year saw friction between hospitals and insurers over pricing and claims, alongside the pilot rollout of the National Health Claims Exchange (NHCX).She noted that regulatory easing by the insurance regulator made product filings simpler, while digital claims processing and fraud mitigation helped reduce costs. Despite these advances, profitability remains a persistent concern for health insurers.
Looking ahead, Anand expressed optimism for 2026, particularly around first-time buyers and affordable products targeted at gig workers and low-income households. She also expects greater collaboration between hospitals and insurers, aided by platforms such as NHCX and Bima Sugam, which could help bring pricing discipline and improve consumer experience.
Insurance Amendment Bill and FDI reforms
Industry leaders broadly agreed that the Insurance Amendment Bill is aligned with expectations, especially the move towards one hundred per cent foreign direct investment and greater regulatory empowerment of IRDAI. These changes are expected to attract foreign capital, deepen technical expertise and potentially trigger consolidation and mergers.However, panelists noted that provisions around value-added services and composite licensing for agents were missing and could be introduced in future phases.
What will drive growth in 2026?
Malani identified rising consumer awareness, backed by trust and intent to purchase, as the single biggest growth driver for the insurance industry in 2026. While technology adoption and regulatory reforms are already underway, solving for profitability through disciplined underwriting will be crucial to unlocking innovation and long-term capital inflows.Summing up, industry leaders agreed that while 2025 laid the foundation, 2026 will be the year of execution, focused on affordability, claims trust, product innovation and expanding insurance coverage across India.
