Economic Survey 2025-26: Transformation of India’s Insurance Sector: The Road to 2047

India’s insurance sector is gradually moving into a new phase as the country looks ahead to the 2047 target of wider insurance coverage. Not very long ago, insurance was often treated as an afterthought, something purchased late or only after a scare. That mindset is slowly changing. More people are beginning to see insurance as a routine financial decision, similar to saving or investing, rather than a distress purchase. Alongside this behavioural shift, the industry itself is becoming a more visible contributor to long-term capital formation in the economy.

How The Numbers Have Changed

The scale of the sector today is very different from what it was a few years ago. Assets under management (AUM) have risen to around Rs 74.4 lakh crore in FY25. Premium collections have also moved up steadily, from nearly Rs 8.3 lakh crore in FY21 to about Rs 11.9 lakh crore in FY25. Life insurance still accounts for the overwhelming share of these assets, holding close to nine-tenths of the total. Within the general insurance segment, however, there is a clear shift in preference. Health insurance has moved ahead of motor insurance in premium contribution, largely because medical and hospital costs have become a central financial concern for many families.

Presence Beyond Big Cities

Insurance companies have been increasing their physical and advisory footprint to reach customers outside major urban centres. By March 2025, insurance firms together had upwards of 22,000 offices across India, not just in big cities but in smaller localities as well. Alongside these branches, a wide network of agents and brokers continues to handle most first-time enquiries and policy sales. The increase in presence is easier to spot in smaller towns and rural belts that earlier had limited access to insurers. Year after year, insurers disburse large sums in claims, especially on life policies, and for many households, that money ends up being the difference between coping somehow and slipping into serious financial difficulty when an unexpected loss hits.

Reforms And The Gap That Remains

Recent government moves have changed how the insurance business operates. In 2025, the Sabka Bima, Sabki Suraksha legislation allowed insurers to be fully foreign-owned, bringing in more international investment. Around the same period, GST was removed from life and health insurance premiums, which eased the upfront cost for many policy buyers. Despite these steps, a sizeable portion of people still remain either uninsured or underinsured. Medical bills that keep climbing, weather-linked losses, and a simple lack of awareness about available policies continue to hold back wider coverage. Bridging this gap will depend on steady capital inflow, simpler policy designs, and stronger digital distribution so that insurance becomes easier for ordinary households to understand and purchase.