Centrum Broking forecasts robust growth for India's life insurance sector through FY29, citing rising demand for protection and annuity products, improved profitability, and a strategic shift away from unit-linked insurance plans by private players.
India Life Insurance Sector Poised for Healthy Growth Amid Demand
India's life insurance sector is expected to sustain healthy growth over the next three years, supported by rising demand for protection products, increasing traction in annuity and non-participating savings policies, and improving profitability, according to a research report by Centrum Broking. The brokerage expects private life insurers to deliver an annualised premium equivalent (APE) compound annual growth rate (CAGR) of 13-18 per cent during FY26-29, reflecting continued demand for life insurance products and a gradual improvement in business mix.
"We continue to remain optimistic on life insurance industry with a healthy Q2," the report said, highlighting improving product composition and expanding value of new business (VNB) margins as key factors supporting the sector's growth outlook. During the second quarter of FY27, APE growth across insurers ranged between 7 per cent and 16 per cent, while gross premium growth among private insurers remained healthy at 8-16 per cent year-on-year. New business premium growth also remained encouraging, with insurers reporting increased traction in both individual and group insurance segments.
A significant trend emerging across the industry is the shift towards protection, non-participating savings and annuity products. Insurers are increasingly reducing their dependence on unit-linked insurance plans (ULIPs), amid market volatility, and focusing on products that offer more stable margins and profitability. "Overall, annuity is emerging as a key growth driver, supported by demand for guaranteed returns and retirement solutions, while insurers increasingly shift towards protection and higher-margin products," the report said.
The changing product mix also supported an improvement in VNB margins, a key measure of profitability from new insurance business. During H1FY27, VNB margins expanded by 10-170 basis points year-on-year across private insurers, driven by stronger protection business, favourable product mix and operating leverage. LIC also reported a 470-basis-point expansion in its VNB margin to 22.3 per cent. However, the sector continues to face certain operational challenges. Expense ratios increased across several private insurers during Q2FY27, primarily due to higher operating costs. Persistency trends, which indicate the continuation of insurance policies over time, also remained mixed, with 13-month persistency declining across most insurers.
On the regulatory front, insurers expressed confidence in their ability to comply with proposed norms, although further clarity is expected following the release of final regulations. The brokerage said sustained growth in protection products, annuity offerings and distribution expansion would remain important drivers of the industry's profitability and business growth over the coming years.
