Life insurance sector expands amid digital shift and regulatory push, says IAC Life's Kamlesh Rao

India’s life insurance industry is recording growth but still faces structural challenges such as low penetration and modest returns compared to other financial services. According to Kamlesh Rao, Chairperson of the Insurance Awareness Committee (IAC-Life), reforms and digital adoption are beginning to reshape the sector’s trajectory.

Rao told CNBC-TV18 that new business premiums reached ₹3.97 lakh crore in FY25, up 5.1% from the previous year. He noted that private insurers have been expanding faster, with gross written premiums expected to cross ₹10.1 lakh crore by 2025.

However, penetration remains at about 3.8% of GDP, a figure that highlights both the industry’s progress and the untapped opportunity.

The sector’s distribution model is undergoing visible changes. Rao said agents still account for nearly 60% of new business premiums because life insurance remains a high-involvement purchase where personal trust matters.

At the same time, he pointed out that digital platforms, bancassurance, and aggregator channels are increasingly driving policy discovery and servicing.

“The balance lies in hybrid models, where technology simplifies processes but advisors continue to play a central role in customer reassurance,” he said.

Regulatory action has been another key driver.

In recent years, the Insurance Regulatory and Development Authority of India (IRDAI) has introduced measures such as GST exemptions on select products, surrender value reforms, and a 'use and file' framework to speed up product launches.

Rao said these steps are already reducing costs, improving transparency, and allowing insurers to respond faster to customer needs. He also highlighted the Bima Trinity initiatives, including Bima Sugam — a proposed digital marketplace for insurance — which he said could act as the “UPI of insurance.”

Profitability, however, remains constrained.

Rao acknowledged that insurers’ return on equity trails banks and NBFCs, given the upfront acquisition costs and long-duration nature of policies.

He said the proposed move to a risk-based capital framework would allow capital allocation to better reflect product risk, “creating room for innovation and more efficient pricing.”

Life insurers also play an important role in long-term financing. As of March 2024, the sector held ₹24.37 lakh crore in government securities — nearly 30% of outstanding G-Secs — and provided coverage to over 6.6 crore lives in rural and social sectors.

Rao said future reforms could allow insurers to participate more deeply in financing infrastructure while continuing to expand protection to underserved populations.

On customer service, Rao said grievance ratios have fallen by more than half since FY15, with faster claim settlements and higher adoption of contactless verification. Persistency ratios, he added, have improved as insurers invest in customer education and digital engagement.

“Digital rails and regulatory reforms are giving the sector the chance to expand reach at scale. The opportunity is clear: to move India from being under-insured to truly protected,” Rao said.

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