You’re Buying Insurance the Way Banks Want, Not the Way You Should
11 min read
Cheat Sheet
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49.66% of all private life insurance is sold through banks (FY 2024-25). Half the time you “buy” insurance from a private insurer, a bank employee made the sale.
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LIC is the opposite: 93.86% through individual agents. LIC’s business model is its 1.3 million agents, not bank partnerships.
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Online insurance (direct insurer websites + apps) is just 0.87% of industry new business premium. Web aggregators (PolicyBazaar, Coverfox, etc.) are even smaller: 0.01%.
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The channel you buy through shapes what you’re offered. Banks push products with higher commissions. Agents push what they understand. Online gives you comparisons but no hand-holding.
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Despite billions spent on digital marketing, 99 out of 100 insurance policies are still sold offline. The insurance industry’s digital transformation is mostly in advertising, not in actual sales.
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All data from IRDAI Annual Report 2024-25, Table II.10 (Individual New Business Premium by Channel).
49.66%
Private Insurers via Banks
FY 2024-25
—Nearly half of all private sales
93.86%
LIC via Agents
FY 2024-25
—Agent network dominance
0.87%
Industry Online Channel
FY 2024-25
—Less than 1 in 100 policies
You’ve seen the ads. Every insurance comparison site tells you to “compare and buy online in 5 minutes.” Instagram is full of personal finance influencers telling you to skip the agent and go direct. But IRDAI’s own data tells a different story: 99% of life insurance in India is still sold by a person standing in front of you, whether that’s an agent, a bank employee, or a broker. Online is a rounding error.
How insurance actually gets sold in India
Individual new business premium by channel, FY 2024-25
| Channel ⇅ | Private Insurers ⇅ | LIC ⇅ | Industry ⇅ |
|---|---|---|---|
| Individual agents | 22.80% | 93.86% | 49.44% |
| Bancassurance (bank partners) | 49.66% | 4.13% | 32.59% |
| Direct business | 17.09% | 0.00% | 10.68% |
| Brokers | 5.81% | 0.23% | 3.72% |
| Online (insurer websites/apps) | 1.07% | 0.53% | 0.87% |
IRDAI Annual Report 2024-25, Table II.10.
Two numbers define the industry. 93.86%: the share of LIC’s business that comes through individual agents. 49.66%: the share of private insurer business that comes through banks. These two channels, agents and bancassurance, account for 82% of all life insurance sold in India.
The bancassurance reality
When a bank relationship manager mentions insurance during your home loan meeting or FD renewal, that’s bancassurance. The bank is a “corporate agent” for one or more insurers. The bank earns a commission, the insurer gets a customer, and you get a policy you may not have planned to buy.
Half of all private life insurance flows through this channel. That’s not an accident. Private insurers found it more efficient to partner with banks than to build agent networks from scratch. A bank with 5,000 branches gives an insurer instant access to millions of customers who already trust the brand.
The problem is incentive alignment. The bank earns commission on the sale, not on whether you renew. The relationship manager has a quarterly insurance target alongside their loan and deposit targets. Your “best plan” recommendation may be shaped by which insurer pays the bank more.
IRDAI enforcement, FY 2024-25
₹2 crore fine
Bajaj Finance (corporate agent) was fined ₹2 crore for receiving “non-commission payments” from insurers, providing incorrect regulatory filings, not recording insurance sales calls, and having no grievance mechanism. This is what bancassurance looks like when the incentives are wrong.
Largest FY 2024-25 agent penaltyIRDAI Annual Report 2024-25, Enforcement Actions.
What this means for you
If you’re buying insurance through a bank, recognise the dynamic: the bank is a salesperson, not an advisor. Ask for the benefit illustration document before signing. Compare the plan they’re offering with at least two alternatives on the insurer’s own website. If the bank employee can’t explain why this specific plan suits your needs, the recommendation is probably driven by their target sheet, not your requirements.
LIC’s agent army
LIC runs on 93.86% individual agents. India has 3.12 million registered life insurance agents (IRDAI Annual Report 2024-25), and the majority work for LIC. This network reaches towns and villages that no bank branch or website can.
The agent model has its own trade-offs. Agents earn commission weighted toward the first year (typically 25-35% of first-year premium for traditional plans, lower for term plans). This creates a bias toward selling higher-premium products where the agent earns more, rather than lower-premium term plans where the buyer gets better value per rupee.
But the agent also provides something the online channel doesn’t: persistence. An agent who sold your parents their policy 20 years ago is the person your family calls when they need to file a claim. That relationship has value that a comparison website can’t replicate.
What this means for you
If you’re buying through an agent, ask them to show you a term plan quote alongside whatever they’re recommending. If they resist, it’s likely because their commission on a term plan is a fraction of what they earn on the product they’re pushing. A good agent will explain the trade-offs honestly. A bad one will steer you toward whatever pays them the most.
The online illusion
Online insurance gets outsized attention from personal finance media and digital marketers. Every comparison site positions itself as the modern, transparent alternative to pushy agents and conflicted banks. But the data says otherwise.
0.87% of industry premium comes through insurer websites and apps. Web aggregators (the comparison platforms) account for 0.01%. Combined, less than 1% of all life insurance premium is collected online.
This doesn’t mean online buyers are making bad choices. In fact, online term insurance is often cheaper (no agent commission built into the premium) and the buyer has done their own research. But the scale is tiny. The vast majority of Indians still buy insurance the way they always have: from a person they know or a bank they trust.
What this means for you
If you’re comfortable researching online, buying direct from the insurer’s website gets you the lowest premium (no intermediary commission). But don’t assume that an online comparison platform is neutral. Web aggregators earn commission from insurers; their rankings and “best plan” labels can be influenced by those commercial relationships. IRDAI fined both HDFC Life and SBI Life in FY 2024-25 for overpaying web aggregators beyond permitted limits.
Direct business: what it actually means
17.09% of private insurer premium comes through “direct business.” This sounds like people buying directly, but it’s not what you’d expect. Direct business primarily means:
- Corporate group policies: Employer-sponsored insurance purchased directly by the company
- Institutional sales: Bulk policies for microfinance institutions, cooperative societies
- Walk-in customers: People who visit the insurer’s branch directly (a small fraction)
LIC shows 0.00% for direct business in individual new business. This is because LIC’s agent network is so pervasive that virtually every individual policy is sold through an agent, even if the customer initiated the enquiry.
What the channel tells you about the product
The channel isn’t just about how you buy. It shapes what you buy.
- Agent channel (49.44% of industry): Skews toward traditional plans (endowment, money-back) because agents earn higher commissions on these. Term plan penetration through agents is low.
- Bancassurance (32.59% of industry): Skews toward ULIPs and single-premium plans. Banks prefer products that generate higher one-time commissions and can be linked to loan disbursals.
- Online (0.87% of industry): Skews heavily toward pure term plans. Online buyers tend to be younger, urban, salaried, and research-driven. They buy the product that personal finance blogs recommend.
- Brokers (3.72% of industry): Serve higher-net-worth individuals and small businesses. Tend to offer more diverse product options because brokers can sell from multiple insurers.
What this means for you
Be aware of the channel bias when you buy. If a bank recommends a ULIP, ask yourself: would an independent advisor suggest the same thing? If an agent pushes an endowment plan, check whether a term plan would give you more cover for the same premium. The product you end up with is often a function of who sold it to you, not what you actually needed.
Frequently asked questions
Why is online insurance still less than 1% of the market?
Three reasons. First, insurance is a complex product that most people want explained by a person, not a webpage. Second, the bulk of India’s insured population lives in semi-urban and rural areas where digital transactions are growing but not yet the default. Third, the existing agent and bank networks actively work to retain customers in their channels. Despite high digital ad spend by aggregators and direct insurers, the actual conversion to online purchase remains tiny. Source: IRDAI Annual Report 2024-25 shows 0.87% online share.
Is buying insurance online cheaper?
Usually yes, for term insurance. Online term plans often have lower premiums because there’s no agent commission built into the price. The difference can be 10-20% on pure term plans. For traditional and ULIP products, the price difference between online and offline is smaller because the commission structures are different. The trade-off: online gives you a lower price but no hand-holding during the claim process (though the insurer’s claims team handles this regardless of how you bought).
Can a bank force me to buy insurance with my loan?
No. IRDAI and RBI guidelines explicitly prohibit tying insurance sales to loan approvals. A bank cannot make insurance a condition for granting a loan, credit card, or any other banking product. If a bank employee tells you insurance is “mandatory” for your loan, ask for that in writing. They won’t give it because it’s illegal. You can file a complaint with both RBI (for the lending practice) and IRDAI (for the insurance mis-selling).
Are web aggregator recommendations trustworthy?
Web aggregators are licensed by IRDAI and must follow disclosure rules. But they earn commission from insurers, which can influence plan rankings and “best plan” labels. In FY 2024-25, IRDAI fined both HDFC Life (₹2 crore) and SBI Life (₹1 crore) for paying web aggregators more than permitted, suggesting the commercial relationship sometimes goes beyond regulated limits. Use aggregators for comparison data, but verify recommendations against the insurer’s direct website and independent reviews.
How many insurance agents are there in India?
India has 3.12 million registered life insurance agents as of FY 2024-25 (65.58% male, 34.42% female), plus 2.72 million Point of Sales persons and additional corporate agents and brokers. The total registered insurance intermediary count is over 5.45 million. LIC alone accounts for the majority of individual agents. Source: IRDAI Annual Report 2024-25.
Related data stories
Methodology
Data source: IRDAI Annual Report 2024-25, Table II.10 (Distribution Channel-wise Individual New Business Premium). All percentages are based on first-year individual new business premium (regular + single premium combined).
Channel definitions: “Online” refers to policies purchased through the insurer’s own website or mobile app. “Web aggregators” are IRDAI-licensed comparison platforms (PolicyBazaar, Coverfox, etc.) that earn commission from insurers. “Bancassurance” covers all corporate agent-bank arrangements where a bank sells insurance on behalf of a partner insurer. “Direct business” includes employer group policies, institutional sales, and walk-in branch purchases.
Limitations: The data is available only at the LIC/private/industry aggregate level, not by individual insurer. This means we cannot determine, for example, what percentage of HDFC Life’s business comes through its bank partners versus its agents. The data also combines regular and single-premium business, which may skew channel proportions (bancassurance tends to have a higher share of single-premium products).
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Reviewed and Edited by
Ashok Hegde
Ashok Hegde is the Chief Executive Officer at Quantent, where he leads a team of media professionals helping clients leverage digital media for better business outcomes. With over 30 years of experience across print and digital media, he advises clients on content and media strategy — from startups to established brands. His focus is on helping organisations use online media — social, search, and mobile — to build brand awareness, drive sales, and protect reputation.
