Life insurance penetration dips to 2.7% in FY25, overall penetration flat

Despite strong premium growth, investment income for the life insurance industry came under pressure during FY25.

• Life insurance penetration fell to 2.7% in FY25, overall insurance at 3.7%.
• Life insurance premium income grew 6.73% to Rs 8.86 lakh crore in FY25
• Industry profit after tax rose 18.14% to Rs 56,006 crore in FY25

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India’s life insurance penetration slipped to 2.7 percent in 2024-25 from 2.8 percent a year ago, even as overall insurance penetration remained unchanged at 3.7 percent, with non-life penetration stagnating at 1 percent for the second consecutive year.

According to the annual report released by Insurance Regulatory and Development Authority of India, the life insurance industry reported premium income of Rs 8.86 lakh crore in FY25, registering a growth of 6.73 percent over the previous year. Private sector life insurers outpaced the broader market, recording a 12.07 percent growth in premium income, while the public sector life insurer posted a relatively modest growth of 2.75 percent.

The life insurance segment continued to dominate the industry’s product mix, accounting for 80.73 percent of total life insurance premiums. Pension and annuity products together contributed 18.87 percent, underscoring the growing relevance of long-term savings and retirement-oriented offerings amid changing demographic trends.

Capital position strengthens

As of March 31, 2025, the total paid-up capital of the life insurance sector stood at Rs 39,714 crore, reflecting a year-on-year increase of 7.12 percent. The increase was driven primarily by fresh capital infusions, including a Rs 1,600 crore injection into Tata AIA Life Insurance Company and Rs 1,040 crore invested collectively by other life insurers.

Overall, the net increase in paid-up capital during FY25 amounted to Rs 2,640.87 crore. In addition, one private sector life insurer called back Rs 70 crore during the year, while five private insurers raised a combined Rs 4,490 crore through Other Forms of Capital (OFC). As of end-March 2025, total OFC with life insurers stood at Rs 9,651.50 crore.

Investment income under pressure

Despite strong premium growth, investment income for the life insurance industry came under pressure during FY25.

Total investment income including policyholders’ and shareholders’ funds, capital gains and other income declined by 10.86 percent to Rs 5.51 lakh crore.

While the public sector life insurer recorded a 4.44 percent increase in investment income, private sector life insurers witnessed a sharp 35.59 percent decline, reflecting market volatility and a challenging investment environment during the year.

Profitability improves across the board

Profitability, however, remained a bright spot.

Out of the 25 life insurers operating in FY25, 18 companies reported profits. The life insurance industry’s profit after tax rose by 18.14 percent to Rs 56,006 crore, compared with Rs 47,407 crore in FY24.

The public sector life insurer reported an 18.38 percent increase in profits, while private sector life insurers collectively recorded a 16.69 percent rise.

Dividend payouts also increased, with private sector life insurers paying Rs 1,714 crore during the year, while the public sector life insurer distributed Rs 3,795 crore to shareholders.