Eyeing No. 2 Spot In Asia: How India's Insurance Market Is Reshaping Financial Planning

While the global economy remains turbulent, India's insurance sector is going strong. According to the Allianz Global Insurance Report 2025, India is one of the fastest-growing insurance markets in the world.

India's life insurance sector, in particular, is poised for a major leap. With an expected compound annual growth rate (CAGR) of 10.5 per cent, India is set to outpace not just its South Asian neighbours but even established Asian giants like Japan. By 2035, India is projected to become the second-largest life insurance market in Asia, trailing only China. In comparison, China is expected to grow at 7.8 per cent annually, while Western Europe will see a more subdued 3.2 per cent growth.

The reasons behind India's sharp upward trajectory are both demographic and structural. First, there's the sheer scale of its working-age population—young, increasingly urbanised, and actively seeking financial tools that offer both protection and long-term security. Also, government-sponsored health support is limited, especially in the field of healthcare. Thus, there is a natural demand for private solutions, especially savings-based life insurance products.

According to the report, India's life insurance penetration was a mere 2.7 per cent of the GDP in 2024, which is behind developed markets but ahead of several emerging markets.

While this means that there is room for growth, the report also points towards an important shift. Indians are looking at life insurance not only as a tax-saving instrument but as a core part of financial planning.

However, health insurance tells a different story altogether. There is a rise in demand, but the health insurance penetration remains low at 0,5 per cent, a lot lower than countries like the US or even Taiwan. While government schemes like Ayushman Bharat have made an impact, generally, health insurance coverage is still limited to urban areas or employer-sponsored health plans.

The property and casualty (P&C) segment also has a scope to expand. In 2024, Indians spent only about EUR22.6 billion on P&C insurance, translating to per capita spending of just EUR16—a fraction of the EUR1,190 seen in Western Europe or EUR3,700 in North America. Insurance penetration in this segment remains only at 0.6 per cent. This is despite a rise in climate risks, increasing home ownership, and growth in commercial activity.

As we see more global uncertainty, such as climate disasters and cyber threats, the importance of insurance becomes more crucial. For India, there is an opportunity to embed insurance in the mainstream in the coming decade. But this would require trust, education, and innovation.

For this, insurers need to build products that are accessible, affordable, and relevant to Indian customers. Going ahead, insurance may play a more important role, from a peripheral safeguard to a financial essential.