India’s insurance penetration has flatlined at 3.7% for two straight years, roughly half the global average of 7.3%. Speaking at the CII-organized InsureInd conference in Kolkata on February 25, IRDAI Member (Non-Life) Deepak Sood pinpointed why: the industry spends too much acquiring and managing customers, and those costs get passed through as higher premiums that keep ordinary households priced out.
Key Fact
India’s insurance penetration has been stuck at 3.7% for two consecutive years — roughly half the global average of 7.3%.
“The high cost of acquisition and high expenses of management need immediate focus from all players,” Sood said. “That is critical to improve profitability and deliver affordability and value to customers.”
The “low-penetration, high-cost” trap
Sood described a self-reinforcing cycle. Insurers spend heavily on commissions and administration. That spending inflates premiums. Higher premiums shrink the buyer pool. A smaller pool raises per-customer costs, and the loop repeats. The Economic Survey for FY 2025-26 backed this up, flagging rising acquisition and administrative expenses as structural constraints on industry expansion.
The numbers bear it out. Life insurance penetration sits at just 2.7% of GDP; non-life at 1%. Insurance density (premium per capita) inched from $95 to $97 between FY 2023-24 and FY 2024-25. For a market projected to reach $222 billion by 2026, those are modest gains.
Did You Know
India’s insurance density — the average premium collected per person per year — is just $97, up marginally from $95 the year before.
The missing middle
Sood zeroed in on a specific gap: households that earn too much to qualify for government schemes like Ayushman Bharat-Pradhan Mantri Jan Arogya Yojana but not enough to comfortably afford private coverage. This “missing middle” remains the largest underserved segment, and reaching it requires products priced well below current averages.
To that end, the regulator has expanded its “Use and File” procedure, letting insurers launch customer-centric products without waiting for prior approval (they still have to comply with regulations). The idea is to cut time-to-market so companies can experiment with lower-cost designs.
Quick Tip
Under IRDAI’s ‘Use and File’ procedure, insurers can now launch new products without waiting for prior regulatory approval — so expect simpler, lower-cost term options to reach the market faster.
Mis-selling: the trust problem
Beyond pricing, Sood called out the mis-selling practices that have dogged the industry for years. “Selling correctly is an imperative for every salesperson, distributor and insurance company,” he said, noting that mis-selling erodes customer trust and harms insurers too through higher lapse rates and complaints.
What this means for policyholders
IRDAI’s three-pillar framework (affordability, accessibility, awareness) points toward a market where premiums come down, distribution goes digital, and products are simpler to understand. The regulator’s 2047 target of universal meaningful coverage in life, health, and property insurance gives the industry two decades. But Sood’s message was blunt: unless insurers fix their cost structure and sales practices first, that goal stays out of reach.
Watch Out
The 2047 universal coverage target is still two decades away — and regulators have been explicit that it hinges on insurers cleaning up their cost structures and sales practices first.
Sources: PTI via Rediff Money, Business Standard, DevDiscourse, IRDAI Annual Report 2023-24, Economic Survey FY 2025-26
IRDAI rules that protect you as a policyholder
Sood’s remarks focused on industry-level problems, but IRDAI has also been strengthening individual policyholder protections. Here are the rules that matter if you hold or are buying a term policy:
- 30-day free-look: Return any life or health policy within 30 days of receiving the document for a refund (effective April 1, 2024).
- 30-day claims settlement: Insurers must settle straightforward claims within 15 days of receiving all documents, or within 45 days if investigation is needed (per the 2024 Master Circular). Delays attract interest payable to the claimant.
- Grievance timeline: Insurers must acknowledge complaints within 3 working days and resolve them within 15 days. If they don’t, you can escalate to IRDAI’s grievance portal or the Insurance Ombudsman.
- Mis-selling recourse: If you were sold a policy through misrepresentation, you can file a complaint with IRDAI or approach the Insurance Ombudsman for resolution.
- Use and File: Insurers can now launch products without prior approval, which should bring simpler, cheaper term plans to market faster.
Related Reading
Disclaimer: This article is for informational purposes only and does not constitute insurance advice. Consult an IRDAI-registered insurance advisor for recommendations tailored to your specific financial situation and needs.
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Gyansurance Editorial
The Gyansurance Editorial team is a mix of financial journalists, insurance advisors and copy editors. Together, we are aiming to demystify life insurance for Indian readers around the world.
