India is among the fastest-growing economies in the whole world (7.7% GDP growth in FY26). Yet when it comes to insurance adoption, the country continues to lag significantly behind global standards.
It is not that insurance is expensive in India. In fact, insurance premiums are among the lowest in the Asia-Pacific region. Still, insurance penetration in India remains inadequately low. The biggest reason, and concern, is the fact that insurance is still largely a “push product” instead of a “pull product”. That means people usually buy it only after a nudge from an agent, employer, financial institution or regulator, rather than recognising its importance and buying it proactively. This leads to many people being only partly insured or uninsured altogether.
Land of the underinsured
The numbers paint a stark picture. According to a Swiss Re report, India's insurance penetration is just 3.7%, with life insurance accounting for 2.7% and non-life insurance just 1% of GDP. Insurance penetration, measured as gross premiums as a percentage of GDP, is significantly low compared to other countries, both developed and developing.
Even more alarming is the protection gap: only around 15% of economic losses in India are insured, leaving nearly 85% of losses to be borne by individuals, families, businesses and governments.
This gap becomes particularly evident during natural disasters, medical emergencies, road accidents, fires, and other unforeseen events. Given the rising medical expenses, a single hospitalisation can wipe out years of household savings, while damage to a home, shop, or factory can create severe financial distress. Yet, insurance often remains low on the priority list for most Indians.
Health insurance presents a similar challenge. While awareness has improved over the past few years—especially after the covid-19 pandemic—the proportion of the population covered by private health insurance remains relatively low when government-sponsored schemes are excluded. Most people underestimate what a hospital bill can do to their finances-until they face one themselves. There is a severe need for individuals and families to understand that rising inflation in healthcare expenses further increase the need for sufficient health insurance coverage.
The situation is equally concerning in motor insurance. While third-party motor insurance is mandatory by law, an estimated 52% of vehicles on Indian roads remain uninsured. This is particularly alarming considering India consistently records the highest numbers of road accidents globally. An uninsured vehicle running on the road not only exposes the owner to financial risks but also creates challenges for accident victims seeking compensation.
Policy reforms: necessary but not sufficient
Recognising the need for greater insurance inclusion, the government and regulators have undertaken several reforms aimed at strengthening the insurance ecosystem. The recently enacted Sabka Bima, Sabki Raksha (Amendment of Insurance Laws) Act, 2025, with key provisions such as increasing the foreign direct investment (FDI) limit in insurance to 100%, is expected to attract fresh capital, foster innovation, and increase access to insurance across the country.
Similarly, the Insurance Regulatory and Development Authority of India (Irdai) has articulated an ambitious vision of ‘Insurance for all by 2047’. The objective is straightforward yet transformative: every citizen should have access to life, health, and property insurance, and every enterprise should have suitable risk protection. This vision aligns with the government’s broader goal of inclusive economic growth and financial resilience.
Another welcome step is last year’s GST exemption for individual life and health insurance policies, including family floater plans, which makes insurance more affordable.
The bigger challenge: changing mindsets
However, policy reforms alone cannot bridge the protection gap. The bigger challenge is changing consumer behaviour and mindset. Insurance should not be viewed as a discretionary expense but as an essential financial safeguard. Unfortunately, many people either buy inadequate coverage or discontinue their policies after a few years, defeating the very purpose of long-term protection against uncertainties.
Consumers must understand that insurance is not a one-time purchase but an ongoing financial commitment. As income levels rise, responsibilities increase, and lifestyles evolve, insurance coverage should be reviewed periodically and enhanced accordingly.
For individuals, a well-rounded insurance portfolio should ideally include health insurance, term life insurance, personal accident cover, and protection for key assets such as homes and vehicles. Business owners and corporations should also consider property, liability, cyber, and employee-related insurance, depending on their risk profile.
Ultimately, insurance is not about predicting the future; it is about being prepared for life's uncertainties. Until more Indians view insurance as a necessity rather than an option, the country's risk protection gap will remain significant. The good news, however, is that awareness is growing, reforms are gathering pace, and the insurance ecosystem is steadily evolving. While the progress may be gradual, the journey is well underway, and there is still a long way to go.
Subrata Mondal is managing director and CEO at IFFCO TOKIO General Insurance Company Limited.