Life Insurance Penetration Falls for Third Year; Overall Insurance Coverage Stays Flat in FY25

India’s life insurance penetration declined for the third straight year in FY25, falling to 2.7% of GDP, according to the latest annual report by insurance regulator Irdai. This is down from 2.8% in FY24 and 3.2% in FY22.

Over the past few years, life insurance penetration has steadily weakened, highlighting slower growth in coverage relative to the economy.

Overall Insurance Penetration Remains Unchanged

Despite the fall in life insurance penetration, overall insurance penetration stayed flat at 3.7% in FY25. This includes both life and non-life insurance segments.

Non-life insurance penetration, which covers health, motor, fire, and other policies, also remained unchanged at 1% compared with the previous year.

Premium Income Continues to Grow

Even as penetration declined, the life insurance industry reported growth in premium collections. Total life insurance premium income rose 6.73% year-on-year to ₹8.86 lakh crore in FY25.

Private life insurers recorded stronger growth of 12.07%, while Life Insurance Corporation of India (LIC) saw a slower increase of 2.75%. Life insurance continued to dominate the sector, accounting for over 80% of total insurance premiums.

Non-Life Insurance: Health Leads the Way

In the non-life segment, health insurance remained the largest contributor, making up more than 41% of total non-life premiums. Health insurance premiums grew 9.19% to ₹1.18 lakh crore in FY25.

Motor insurance was the second-largest segment, growing 8% to nearly ₹99,100 crore. Fire and marine insurance followed, with moderate premium growth.

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Policy Reforms May Support Future Growth

The data comes amid major policy changes. The government has raised the FDI limit in insurance to 100% and removed GST on individual life and health insurance policies. These steps aim to attract more investment, lower costs, and improve insurance access across the country.

Conclusion

While insurance premium income continues to grow, falling life insurance penetration shows that coverage is not expanding fast enough. Recent policy reforms could help improve affordability and participation, supporting long-term growth in India’s insurance sector.

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