India's life insurance market is growing, but the gains are not translating into wider coverage, with active individual policies remaining largely flat despite a sharp rise in bank account ownership, according to a McKinsey report.
Active individual life policies stood at around 330 million in FY2025, little changed from FY2017. This contrasts with adult bank account ownership, which rose from 53% in 2014 to 89% in 2025.
The gap highlights a challenge for insurers and advisers as India’s financial infrastructure becomes increasingly accessible but insurance coverage fails to keep pace.
Overall insurance penetration was 3.7% of GDP, compared with a global average of 7.3%. Life insurance penetration was 2.7%, close to the global average of 3%, while non-life insurance penetration was significantly lower at 1%.
Recent life insurance growth has largely been driven by higher policy values rather than greater policy volumes. Individual new business premiums grew at a compound annual growth rate of 10% between FY2022 and FY2025, while individual policy volumes declined by about 2% annually.
At the same time, demand is shifting towards market-linked products. Linked new business premiums grew 23% annually over the period, increasing their share of the market from 29% to 36%.
For advisers, the figures point to a continuing need to address protection gaps rather than focusing solely on investment-led demand. The relatively flat number of active policies suggests that significant sections of the population remain outside the formal life insurance market.
Health insurance has shown stronger expansion, with the number of people covered by individual health policies almost doubling from 32 million in FY2017 to 60 million in FY2025. However, including government schemes, health insurance still covers only 39% of the population.
McKinsey expects increased competition following India’s move towards allowing 100% foreign direct investment in insurance, alongside greater use of artificial intelligence in underwriting, claims and sales, reported Insurance Asia.