India insurance uptake lags despite stronger growth

Private life insurers raised their premium share to 43.3% in March 2026 from 38.2% four years earlier.

India’s insurance penetration remains relatively slow despite economic expansion, but could be further supported by regulatory changes and increased foreign investment support.

The report said India’s economic growth remains stronger than many major Asian markets, whilst insurance penetration is still relatively low, according to an S&P Global Ratings report dated 6 August 2026.  

This provides insurers with scope to expand as incomes rise and more households and businesses take out cover.

Private insurers have continued to gain market share. In life insurance, private companies increased their share of total premiums to 43.3% in March 2026 from 38.2% in March 2022. Public-sector insurers held 56.7%.

In non-life insurance, private insurers accounted for 52.4% of gross domestic premiums in March 2026, up from 49% four years earlier. Stand-alone health insurers increased their share to 13.7% from 9.3%. Public-sector insurers’ share fell to 30.5% from 35%.

S&P said private insurers have benefited from banking and promoter networks, as well as digital distribution. 

Public-sector insurers continue to have a strong position in government and group schemes.

Foreign investment is also increasing after India allowed up to 100% foreign direct investment in insurance companies and insurance intermediaries from 5 February 2026.

Several foreign insurers have since raised or announced plans to increase their stakes in Indian businesses, adding to merger and acquisition activity in the sector.

However, growth has not removed pressure on profitability, particularly in non-life insurance.

S&P said aggressive pricing and high claims in motor third-party and group health insurance continue to weaken underwriting results.

Motor and health insurance together account for more than 70% of total domestic non-life premiums. 

Private insurers write more than 80% of retail health policies and around 70% of motor policies, whilst public-sector insurers account for more than 60% of government schemes and about 40% of group health business.

Investment income remains important to non-life insurers because underwriting margins are weak. 

S&P said public-sector insurers benefit to some extent from returns on large investment portfolios, whilst private insurers generally produce better returns on equity because of more efficient capital structures.

Capital strength is also uneven. Three public-sector general insurers — United India Insurance, National Insurance and Oriental Insurance — had solvency ratios below the regulatory minimum in March 2026, even after regulatory measures designed to provide some relief. 

United India was identified as having the greatest pressure on its capital position.

Private general insurers were generally in a stronger position. Bajaj General had the highest solvency ratio amongst the top 10 non-life insurers, whilst ICICI Lombard, SBI General, HDFC ERGO and Tata AIG also maintained solvency levels above the regulatory minimum.

Conditions in life insurance were more stable. Most leading life insurers had capital buffers above the required level as of March 2026, although profitability varied considerably.

Life Insurance Corporation of India remained the dominant life insurer, whilst private companies continued to expand through bank distribution networks and a greater focus on protection, linked and non-participating savings products.

The industry is also preparing for further regulatory changes. Indian Accounting Standard 117 is being introduced between April 2026 and April 2027, whilst a risk-based capital framework is expected from April 2027, subject to industry readiness and progress in implementing the new accounting standard.

S&P said these changes could improve transparency and bring Indian insurers closer to international standards, but could also increase compliance costs and cause some volatility in capital and earnings during the transition.