India’s life insurance sector bags 12% CAGR in past five years

The life insurance penetration rate is at 3.8%.

The Indian life insurance sector has reached a compound annual growth rate (CAGR) of 12% and 10.5% from fiscal year 2019 to 2024 (FY 2019 to 2024), in terms of new business premiums and annual premiums equivalent, according to Asit C Mehta Investment Intermediates.

Whilst growth has been at snail-pace in FY 2024 thanks to regulatory changes, shift in consumer preference, and higher returns from other funds, revealed the “Thematic Report on India's Life Insurance Sector.”

India's life insurance sector remains underpenetrated, with an insurance penetration rate of 3.8%, compared to the global average of 6.5%. 

To address this gap, the Insurance Regulatory and Development Authority of India (IRDAI) has introduced initiatives such as 'Insurance for All' by 2047 and programs like Bima Vistaar, Bima Vahak, and Bima Sugam to enhance accessibility. 

Factors driving the industry's growth include improving per capita income, rising labour force participation, and a focus on financial inclusion.

Swiss Re projects the Indian life insurance industry to grow at a 7.1% CAGR in real terms over the next five years, outperforming the emerging market average of 5.1% and the 1.7% growth seen in advanced economies.

The industry faced a decline in FY 2024 due to tax structure changes affecting non-participating and higher-premium products, along with increased commission costs and a rise in sales of market-linked products driven by higher returns and tax benefits.