As 2025 draws to a close, India's insurance sector stands at a pivotal moment, marked by significant policy reforms and a surge in digital adoption. Industry leaders are optimistic about the future, viewing 2025 as a transformative year that has laid the foundation for continued growth and innovation in 2026.
One of the most impactful changes has been the passing of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, 2025, which allows 100% foreign direct investment (FDI) in Indian insurance companies. This move is expected to attract global expertise, spur competition, and accelerate innovation across the life, health, general, and reinsurance sectors. The increased foreign participation is also likely to bring down premiums and promote healthy competition between domestic and foreign players. In anticipation of these changes, the Ministry of Finance had earlier issued draft amendments to the Indian Insurance Companies (Foreign Investment) Rules, 2015.
Another landmark decision was the government's move to fully exempt health, personal accident, and travel insurance from the Goods and Services Tax (GST). This reflects a recognition of insurance as an essential financial service, making it more affordable and accessible, especially for lower-income groups.
These policy reforms have coincided with a significant digital surge within the insurance sector. Adoption of artificial intelligence (AI) in underwriting, claims management, and fraud detection has expanded considerably. Digital platforms like Bima Sugam and AI-led claims triaging have reduced turnaround times, improved accuracy, and enhanced customer satisfaction. Industry reports indicate that over 90% of retail insurance policies are now issued digitally, reflecting a broad shift towards online channels.
The non-life insurance sector has demonstrated steady growth, with gross premiums reaching approximately ₹3.08 trillion, a 6.2% increase from the previous year. Health insurance now accounts for over one-third of total premiums, driven by increased awareness, a post-pandemic focus on financial protection, and rising medical inflation. The industry is also witnessing a shift towards digital and cashless claims processing, with 60-70% of claims in urban markets being processed electronically.
However, challenges remain. Insurance penetration remains relatively low at around 1% of GDP, compared to the global average of 4%. Digital adoption has also brought heightened vulnerability to fraud, with industry-wide fraud losses estimated at Rs 50,000 crore, nearly 10% of total premiums. Cyber risks have also escalated, with India recording 2.04 million cybersecurity incidents in 2024.
Looking ahead, the industry anticipates a growth rate of 8-13% in 2026, driven by further digital adoption, broader market penetration, and sustained demand for health and commercial insurance. Innovative insurance solutions like parametric insurance and climate risk modeling are also gaining importance to mitigate climate risks. The focus is shifting towards simpler products, faster claims processing, and deeper customer engagement.
The rise of InsurTech is also transforming the sector, with new ventures and models gaining momentum. Embedded insurance is gaining traction across retail, travel, mobility, and healthcare platforms, and new-age players are building robust APIs and digital infrastructure to enable wider distribution. A joint report forecasts that private funding in the InsurTech industry is expected to exceed $1 billion in the next 12 months.
In conclusion, 2025 has been a defining year for India's insurance sector, marked by policy reforms, digital transformation, and a growing focus on customer centricity. While challenges remain, the industry is well-positioned for continued growth and innovation in the years to come.
