Why rural India is driving 43% of premiums as urban dominance slips

Districts with over 70% rural population contributed up to 24%.

Rural and small Indian cities are pushing almost half of the insurance demand in the country, with digital channels boosting access beyond traditional urban markets.

Policybazaar’s analysis of its platform data from fiscal year 2023 (FY 2023) to 2025 (FY 2025) found that 43% of life and health insurance premiums now come from districts where at least half of the population lives in rural areas, up from 41% in FY 2023. 

Within this, districts with more than 70% rural population contributed around 23% to 24% over the three-year period, whilst those in the 50% to 70% rural range increased slightly from 18% to 19%. 

Smaller cities are also accounting for a growing share of demand. Cities with populations below 1 million generated 47% of life and health premiums in FY 2025, compared to 44% in FY 2023. 

The strongest growth came from cities with populations between 100,000 and 500,000, where the contribution rose from 26% to 29%. 

Motor insurance shows a similar pattern. Rural-majority districts consistently contributed 36% of motor premiums over the three years, indicating stable demand from these areas. 

Cities with fewer than 1 million people accounted for between 44% and 47% of motor premiums, with smaller towns maintaining a notable share. 

The data indicate that insurance demand is no longer concentrated in major urban centres. Instead, growth is being supported by tier-2 and tier-3 cities, district towns, and semi-urban areas, where rising incomes, increased smartphone use, and improving awareness are driving uptake. 

Policybazaar said digital distribution is helping close the gap in insurance access between urban and rural areas, with products such as motor insurance often acting as an entry point for customers who later purchase life and health cover.