Budget 2025: The Economic Survey 2025 stated that the Indian insurance sector has shown an upward trajectory. It noted that total insurance premiums grew by 7.7% in FY24, reaching Rs 11.2 lakh crore. The survey noted that insurance received the highest FDI of 62% of total equity FDI inflows tothe services sector.
The survey, tabled by Finance Minister Nirmala Sitharaman, stated India’s insurance sector is performing well and is projected to become fastest growing market among G20 nations over next 5 years.
"India’s insurance market has also continued its upward trajectory. Total insurance premium grew by 7.7 per cent in FY24, reaching Rs 11.2 lakh crore, despite a slight decline in insurance penetration51 from 4 per cent in FY23 to 3.7 per cent in FY24. Life insurance penetration dropped marginally from 3 per cent in FY23 to 2.8 per cent in FY24, while non-life insurance penetration remained stable at 1 per cent," the survey noted.
It further noted with an insurance penetration rate of 3.7%, lower than the global average of 7%, there exists a significant gap in coverage that presents opportunities for insurers to broaden their market reach. By focusing on tier 2 and 3 cities as well as rural areas with limited awareness and accessibility, insurers can tap into new customer segments and drive growth.
Moreover, insurance density in India is comparatively low on a global scale. Implementing innovative distribution strategies can help bring underinsured customers, who are already beneficiaries of government schemes like Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Fasal Bima Yojana, and Pradhan Mantri Jan Arogya Yojana, into the insurance fold.
"Insurance density in India is relatively low compared to global standards. Innovative distribution models can facilitate the inclusion of underinsured customers who are already covered by government schemes such as the Pradhan Mantri Jeevan Jyoti Bima Yojana, Pradhan Mantri Fasal Bima Yojana, and Pradhan Mantri Jan Arogya Yojana," the survey said.
The survey noted:
> Insurance density in the country saw a modest rise from $92 in FY23 to $95 in FY24. Non-life insurance density increased from $22 to $25, while life insurance density remained consistent at $70. > This growth in insurance density has been on an upward trajectory since FY17. The gross direct premium of non-life insurers increased to Rs 2.9 lakh crore in FY24 from Rs 2.6 lakh crore in FY23, registering a YoY growth of 7.7 per cent. > Health and motor segments primarily contributed to this growth. The life insurance industry recorded a premium income of Rs 8.3 lakh crore in FY24, compared to Rs 7.8 lakh crore in FY23, registering a YoY growth of 6.1 per cent. > While renewal premiums accounted for 54.4 per cent of the total premium received by the life insurers, new businesses contributed the remaining 45.6 per cent. The life insurance industry paid benefits of Rs 5.8 lakh crore in FY24, out of which rs 42,284 crore was due to death claims. The net incurred claims53 of non-life insurers stood at Rs 1.72 lakh crore in FY24.
"The Indian insurance sector is undergoing a dynamic transformation, driven by evolving customer expectations, technological advancements, and regulatory reforms. Despite steady growth, insurance penetration remains at 3.7%, significantly lower than the global average of 7%. This highlights a vast untapped market, particularly in tier 2 and 3 cities and rural areas, where awareness and accessibility remain limited. Expanding coverage in these regions presents a significant opportunity for insurers, especially those leveraging digital platforms and innovative distribution models. The integration of fintech solutions is reshaping the industry, making policies more affordable, accessible, and tailored to individual needs," said Hanut Mehta- CEO and Co-Founder of Bimapay Finsure.
"Government-backed schemes such as Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY), Pradhan Mantri Fasal Bima Yojana (PMFBY), and Pradhan Mantri Jan Arogya Yojana (PMJAY) have played a crucial role in increasing insurance awareness and coverage. However, private insurers and fintech-driven solutions can further bridge the protection gap by offering supplementary microinsurance and flexible premium options. Additionally, digital transformation is revolutionizing the sector, with AI-driven underwriting, blockchain-based policy issuance, and automated claims processing improving efficiency and customer experience," said Mehta.
The Economic Survey, a report created by the Economic Division of the Department of Economic Affairs within the Ministry of Finance and overseen by the chief economic adviser, offers valuable insights on the economic landscape for the year 2024-25 (April-March) along with forecasts for the next fiscal year.