Life insurance premiums top Rs 4 lakh crore for first time, up 15.7% in FY26 on GST cut

By: Team India Tracker

The shift is clear in the numbers: individual premiums rose 10.8% to Rs 1.85 lakh crore, while group business grew faster—up 19.24% to Rs 2.75 lakh crore

The life insurance industry has staged a sharp comeback in FY26, but the headline numbers tell only part of the story. After two subdued years, new business premium (NBP) grew 15.7 per cent year-on-year to Rs 4.59 lakh crore, crossing the Rs 4 lakh crore  mark for the first time. The rebound looks impressive—especially against the 5.13 per cent growth in FY25 and just 2 per cent in FY24—but it is as much about policy tailwinds and base effects as it is about underlying demand.

The single biggest trigger was the government’s decision to cut the goods and services tax (GST) on insurance products from 18 per cent to zero. That move directly reduced the cost of buying policies, making insurance more accessible to households that are typically sensitive to upfront premiums. In a market like India, where insurance penetration remains low, price matters. Lower taxes translated quickly into higher volumes.

The numbers reflect that shift. Individual premiums rose 10.8 per cent to Rs 1.85 lakh crore, while group business—often driven by corporate policies—grew a faster 19.24 per cent to Rs 2.75 lakh crore. The stronger growth in group insurance suggests that companies, too, stepped up coverage, possibly encouraged by lower costs and a greater focus on employee benefits.

At the company level, the recovery was broad-based. The state-owned Life Insurance Corporation (LIC) saw NBP rise 14.9 per cent to Rs 2.60 lakh crore, regaining momentum after a period of slower growth. Private insurers, however, outpaced the market, with premiums growing 16.75 per cent to Rs 1.99 lakh crore. This continues a longer-term trend: private players are gaining share by focusing on product innovation, distribution, and customer targeting.

Among them, SBI Life Insurance posted a 19.6 per cent increase in NBP to Rs 42,550 crore. Bajaj Life Insurance grew 18.7 per cent to Rs 14,585.82 crore, while Axis Max Life Insurance rose 19.12 per cent to Rs 14,501.25 crore. Larger listed players such as HDFC Life Insurance and ICICI Prudential Life Insurance reported more moderate gains of 8.54 per cent and 9.86 per cent, respectively, suggesting that growth is not uniform across the sector.

Monthly data underline the momentum. In March alone, industry NBP surged 23.5 per cent year-on-year to Rs 75,872.3 crore. LIC’s premiums grew 17.35 per cent to Rs 43,310 crore, while private insurers expanded even faster at 32.73 per cent, reaching Rs 32,562.1 crore. This late-year acceleration indicates that demand strengthened as the benefits of tax cuts and new product offerings filtered through.

Still, part of the FY26 rebound reflects recovery from earlier disruptions rather than a purely organic surge. Over the past two years, regulatory changes had dampened growth. In FY24, the government removed tax exemptions on maturity proceeds of high-premium policies—those exceeding Rs 5 lakh annually—reducing the attractiveness of certain savings-linked insurance products. That change, effective April 1, 2023, hit demand and limited NBP growth to 2 per cent.

In FY25, another regulatory shift weighed on the sector. New surrender value norms introduced by the Insurance Regulatory and Development Authority of India (IRDAI), effective October 1, 2024, altered the economics of policies and slowed sales momentum. Growth that year remained muted at 5.13 per cent.

Against that backdrop, FY26 looks like a normalisation year. With the regulatory overhang easing and GST cuts improving affordability, the industry returned to a more typical growth trajectory. Analysts point out that the 15.7 per cent expansion is partly a catch-up effect after two weak years.

There are, however, deeper drivers at work. A lower interest-rate environment has made traditional fixed-income products less attractive, pushing savers to look for alternatives that offer both protection and returns. Insurance products—especially those with guaranteed or market-linked components—fit that need. At the same time, insurers have introduced new products tailored to evolving customer preferences, helping sustain demand.

The increase in the number of policies sold also points to wider participation. Total policies rose 4.7 per cent to 2.83 crore in FY26. LIC sold 1.85 crore policies, up 3.63 per cent, while private insurers grew faster at 6.75 per cent, selling 98.7 lakh  policies. The gap between premium growth and policy growth suggests that ticket sizes may also be rising, particularly in group business.

The key question is whether this pace can be sustained. Tax cuts provide an immediate boost, but their effect tends to taper over time. Future growth will depend more on structural factors: rising incomes, financial awareness, and distribution reach. The industry also needs to navigate evolving regulations, which have proven capable of quickly reshaping demand.

For now, FY26 marks a turning point. The life insurance sector has moved past a phase of regulatory disruption and regained momentum, supported by policy support and improving customer sentiment. But the recovery is not entirely organic. It is a blend of tax-driven demand, regulatory normalisation, and cyclical tailwinds.

In other words, the industry is growing again—but the real test lies ahead.