Insurance buyers upped protection quotient across health, life, motor segments in 2025: Report

Insurance trends 2025

• Insurance focused on protection-led planning in 2025 due to reforms and awareness
• Health cover average up 31%; long-term, high-value policies gained traction
• Tier-3 cities accounted for 70% of purchases, indicating increased insurance reach.

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India's insurance industry in 2025 saw a decisive shift from basic compliance-driven purchases to deeper, protection-led financial planning, driven by regulatory changes, rising awareness and digital adoption, according to a year-end data analysis report by Policybazaar.

The year marked a broad-based upscaling across health, life, motor and travel insurance, with consumers opting for higher covers, longer tenures and richer add-ons.

Health insurance emerged as one of the biggest beneficiaries of policy reform, particularly after the removal of GST on premiums.

Average health cover jumped 31 percent to Rs 19 lakh, with sharp growth in Rs 10–25 lakh and above Rs 25 lakh policies, while demand for sub-Rs 10 lakh covers declined materially.

Consumers also showed a clear preference for long-term protection, with 4 and 5-year health policies seeing over 50 percent growth, and unlimited health plans gaining meaningful traction in 2025. Importantly, insurance demand continued to deepen beyond metros, with Tier-3 cities accounting for 70 percent of purchases, underlining the sector’s expanding geographic footprint.

Term insurance growth was led by younger Indians, signalling a shift towards early financial responsibility.

Buyers aged 25–40 dominated new purchases, with Rs 1 crore emerging as the most preferred cover, even as higher sums assured gained momentum. Salaried individuals formed the bulk of demand.

Motor insurance saw one of its most structural shifts in years, driven by electric vehicles and protection-first buying behaviour.

New EV insurance purchases grew nearly 2.5 times year-on-year, with premiums surging nearly 200 percent, far outpacing traditional fuel vehicles. Consumers increasingly opted for comprehensive coverage, with high adoption of zero-depreciation, roadside assistance and consumables add-ons, particularly for brand-new vehicles. Usage-linked ‘Pay-As-You-Drive’ policies also moved into the mainstream, delivering tangible savings for low-mileage urban drivers, as per Policybazar.

Travel insurance crossed a behavioural inflection point in 2025, transitioning from an optional add-on to a travel essential.

Policy issuance rose 15 percent year-on-year, driven by higher medical cover selections and rising participation from senior citizens. Medical claims dominated by value, while baggage and delay-related issues remained the most frequent claims, reflecting persistent travel disruptions.

Across categories, payments data highlighted UPI’s emergence as the dominant insurance payment rail, alongside growing adoption of UPI Autopay and BNPL (buy now pay later) options.