Insurance year-ender: After an eventful 2025, insurance looks for stability in the year ahead

Mumbai: After a slew of big insurance reforms since the end of 2024, India's insurance sector is hoping for an uneventful year ahead that would give industry participants time to adapt to the policy changes, and get back on the growth track.

The past year saw the impact of the policy surrender value norms introduced in 2024-end. This was followed by the rollout of insurance marketplace Bima Sugam, approval for 100% foreign direct investment in insurance, and GST exemption on retail term and health insurance premiums.

“India enters 2026 with a rare mix of structural tailwinds, regulatory modernization, digital rails (public and private), and a friendlier tax regime for retail protection. Momentum in both life and non-life should pick up from a softer FY25 base," said Narendra Bharindwal, president, Insurance Brokers Association of India (IBAI).

The rollout of Bima Sugam, full foreign ownership, and the top two reforms of 2025–the Insurance Laws amendments and GST exemption–should support growth going ahead, he added.

The 100% foreign direct investment (FDI) allowed under the Insurance Amendment Bill will help attract global capital, enhance competition, strengthen reinsurance capacity as well as facilitate product and technology innovation, said Shruti Ladwa, partner and insurance leader, EY India.

“Relaxed merger norms are likely to spur M&A activity in 2026, while policyholder-centric measures such as the Policyholders' Education and Protection Fund (PEPF) and stronger data protection will improve customer trust and protection," Ladwa said.

Pankaj Gupta, managing director and chief executive officer, Pramerica Life Insurance is optimistic that the steady expansion of the middle class, coupled with growing awareness of uncertainty, will drive growth. “This is reinforcing what many of us have long believed: life insurance is increasingly becoming a core pillar of household financial planning in India," he said.

Other measures such as enhanced policyholder protection norms, refreshed rural and social sector obligations and more customer-friendly surrender value guidelines will also help strengthen trust, transparency and inclusivity, supporting growth going ahead, Gupta added.

Despite the hope for an uneventful year, the insurance sector is looking forward to the regulatory-proposed shift from a solvency-based to a risk-based capital regime to spur the next phase of growth in the country's interiors, and increased use of data, AI and digital infrastructure to bring down operating costs and reduce frauds, especially in health insurance.

“Value-added services, which we expected to come in the current bill, we hope will now be taken up in 2026. This will move insurance from being a push-only product to create pull and connected care models for customers," Pallavi Malani, managing director and partner at BCG India.

GST overhang

Retail term and health insurance policies were exempted from the Goods and Services Tax regime effective 22 September. While the exemption made policy premiums cheaper, it also increased expenses for insurers due to the loss of input tax credit for insurance companies. While initial trends show a spike in interest and demand for some retail plans, some experts are skeptical and believe that these bumps might be short-lived.

“On health insurance, we saw a surge in Google search volume in September and October, but it came down in November and December. This shows that demand for retail products will not see a major bump-up immediately, but hopefully, within the longer term, this will have an impact on the industry in a sustained way," said Malani, adding that the GST exemption is a “structural change" and will have a lingering impact extending into the first half of 2026.

EY India’s Ladwa said that while the sales surge after the GST exemption was partly due to pent-up demand, lower premiums are expected to be a “permanent positive driver" and drive insurance penetration.

“As product pricing, ticket sizes and customer expectations stabilize, the long-term trend for retail policies is strongly positive," she said, adding that the intensity of disruption should reduce as distributors adapt to the new economics. “Insurers and distributors will find a suitable solution that benefits both, wherein the friction of commission cuts in select product categories will be offset by higher volume sales."

The Insurance Regulatory and Development Authority of India (Irdai) launched a pilot of the Bima Sugam marketplace in 2025. Through 2026, the platform is expected to standardize purchase, renewal and claims; aggregate KYC and policy records via a single “Bima Pehchaan" identity; and lower acquisition and service costs by reducing duplication across insurers and intermediaries.

“For brokers, Sugam should expand addressable demand and shrink post-sale friction (endorsements, nominee updates, service tickets). If execution tracks plan, Sugam can become the “UPI-moment" for insurance by late-2026," Bharindwal said.

Health to drive retail growth

Health insurance will remain the main driver of insurance growth in the coming year in, according to industry experts, who believe that while life insurance will also grow, the start might be slow owing to the continued impact of taxation changes on unit-linked insurance plans (Ulips) and changes in surrender value norms.

As a result, life insurers’ value of new business will remain stressed as they rebalance product mix and commission structures to the “new normal", said BCG’s Malani, who is hopeful of the impact tapering by April 2026.

At the Mint BFSI conclave 2025, Rakesh Jain, executive director and chief executive officer of IndusInd General Insurance said that since the GST cut, demand for health plans has grown by 35-40% whereas motor insurance is also seeing an increase in demand. “I expect this trend to continue," he had then said, adding that demand should be supported by the “forward-looking" regulations and improvement in consumer centricity and claims handling.

Experts see life insurance new business premium rebounding slightly to grow 12-18% through 2026, whereas growth in general insurance is seen increasing from single digits in 2025 to “high-single/low-double-digit" led by health and pick-up in motor insurance policies.

“A favourable claims experience is resulting in buyer-friendly pricing, leading many buyers to explore optional automobile damage coverage in addition to compulsory third-party liability policies," said Shantanoo Saxena, chief broking officer, commercial risk, health and wealth solutions, Aon India.

Despite the strong growth outlook, all is not rosy for health insurers as well, especially standalone health insurance companies who face the challenge of absorbing the margin impact from GST changes, expected to normalize by the end of June 2026.

Commercial insurance to pick up

The coming year is also expected to be a big year for commercial insurance, driven by a strengthening of India’s capex cycle, infrastructure build-out, manufacturing expansion, rising corporate awareness towards cyber threats, and demand from new sectors such as renewables and data centres, according to experts.

“Commercial lines of business will also be a key growth engine through 2026 as insurers and brokers focus on higher-ticket, more stable premium pools," said EY’s Ladwa, adding that this is already visible in the 6-20% year-to-date growth seen in business lines such as fire, engineering and liability insurance.

She expects strong momentum to continue in insurance for engineering and construction, liability (including cyber), and specialty lines such as trade credit and parametric covers. “Reinsurance capacity expansion, improved underwriting discipline and greater use of data and risk-engineering are also likely to deepen the market, making commercial insurance a more resilient and sophisticated segment in 2026."

Aon India’s Saxena expects segments such as casualty/liability, cyber, directors and officers cover and property insurance to drive growth.

“With ample capacity in the market, pricing is generally flat-to-decreasing in most lines of business. Property is the main exception, with changes to India’s rating system resulting in double-digit increases," he said.