Life insurance industry to grow 8-11% in FY26, FY27, says CareEdge Ratings

CareEdge expects life insurers to sustain 8-11 per cent growth over the next two years, but warns investors not to overread past trends as margins may face near-term pressure from reforms

The life insurance industry is expected to grow 8–11 per cent in FY26 and FY27, driven by group products, individual pension, and life cover products, analysts at CareEdge Ratings said. In addition, supportive regulations, rapid digitalisation, effective distribution, and improved customer services will also aid growth.

 

How has India’s life insurance sector grown over two decades? 

In the last two decades, the sector has witnessed substantial growth, achieving a compound annual growth rate (CAGR) of around 13 per cent, aligned with gross domestic product (GDP) growth at market prices, which averaged about 12.4 per cent over the same period. An increase in group insurance products, product innovation, personalised offerings, and the development of strong distribution channels in the individual insurance segment drove the sector’s growth.

 

 

What gaps remain despite rising insurance coverage? 

While the number of lives covered by insurance in India has increased significantly from about 15 crore in FY15 to nearly 40 crore in FY25, structural gaps such as low sum assured have left both mortality and longevity risks inadequately addressed.

 

“While policy renewals have improved in FY25, lasting benefits will come from offering adequate protection and reliable retirement income, rather than merely increasing the number of people covered,” the analysts said.

 

What regulatory changes are shaping the sector’s outlook? 

The sector witnessed several key regulatory changes during the year and has entered a phase of stability, with recent reforms aimed at expanding customer access, improving governance, and enhancing transparency. During the year, the industry witnessed goods and services tax (GST) exemption, revised surrender value norms, risk-based solvency, Bima Sugam and the upcoming IFRS 17 transition.

 

“While some changes may pressure margins in the near term, the overall impact is structurally positive for long-term growth and insurance penetration,” the analysts said.

 

How concentrated is India’s life insurance market? 

Life insurance continues to dominate the Indian insurance market, accounting for nearly 74 per cent of total premiums in FY25, significantly higher than the global average of 41 per cent. However, the life insurance sector is concentrated, with the top five players maintaining over 85 per cent of the total premium market share, with the remaining insurers forming a long tail.

 

What is driving growth and what are the risks, according to CareEdge? 

According to Sanjay Agarwal, senior director, CareEdge Ratings, “India’s life insurance industry continues to demonstrate strong long-term potential, with penetration and density levels still well below global averages. Following the pandemic recovery, the sector has maintained a moderate 9 per cent CAGR during FY21–FY25, supported by rising financial literacy, growing household incomes, and increasing demand for protection-oriented and annuity products.”

 

Agarwal added: “With the FDI limit increased to 100 per cent, insurers already operating near the previous 74 per cent cap now have additional headroom for incremental capital infusion by existing foreign promoters, thereby supporting both growth prospects and solvency. Over the next two years, CareEdge expects the life insurance industry to expand at a steady 8–11 per cent CAGR, underpinned by sustained regulatory support, product innovation, rapid digital integration, and improving service delivery. However, downside risks include a mass-cat event, higher death claims, and impacts from interest rate or equity market changes on profitability.”