India's life and general insurance sectors show resilient growth but face profitability and productivity challenges, says a McKinsey report. Life insurers face declining margins, while general insurers grapple with low productivity and rising costs.
New Delhi [India], September 24 (ANI): India’s life and general insurance segments have continued to record resilient growth, but profitability and productivity remain key challenges, with life insurers facing pressure from declining new business margins while general insurers grapple with falling ticket sizes and muted frontline productivity, according to a McKinsey report.
Life Insurance Sector Challenges
According to the report, the top four private life insurers recorded a compound annual growth rate (CAGR) of around 12-16 per cent in new business premium (NBP) and 14-20 per cent growth in embedded value (EV) between FY2022 and FY2026. “At the same time, however, value-of-new-business (VNB) margins declined by three to four percentage points,” it noted.
Overall productivity among the leading Indian life insurers has remained broadly flat in recent years, highlighting the challenge of narrowing the protection gap while maintaining operational efficiency and sustainable margins. “Zeroing in on sales and distribution, analysis finds that, while NBP grew at some 14 percent CAGR over fiscal years 2022–25, total operating expenses grew by around 20 percent CAGR during the same period,” the report said.
General Insurance Sector Hurdles
At the same time, India’s general insurance sector recorded around 12 per cent CAGR in premiums between FY2022 and FY2025, driven by higher policy volumes. “Productivity across the top five private multiline general insurers has declined by 2.5 percent per annum over financial years 2022–26, measured as premium per unit of employee expense,” McKinsey noted in its report.
As per the report, the broader general insurance sector continues to face structural challenges, including low frontline productivity, manual underwriting processes and fragmented data, while claims management has emerged as a key differentiator of profitability. At the same time, rising customer expectations, shaped by digitally mature sectors such as banking and e-commerce, are increasing pressure on insurers to improve the overall customer experience.
Widening Protection Gap Amidst Economic Growth
On a broader level, India’s insurance adoption has failed to keep pace with its rapid economic growth and rising participation in formal financial services, widening the country’s protection gap compared with global benchmarks. This comes despite the country being on track to become the world’s third-largest economy by the end of this decade, with nominal GDP expected to approach USD 7.3 trillion by 2030.
India’s adult bank account ownership increased from 53 per cent in 2014 to 89 per cent in 2025, while the number of demat accounts rose nearly eightfold from around 28 million in FY2017 to about 225 million in FY2026. Meanwhile, “between fiscal years 2017 and 2025, the number of in-force individual life insurance policies has remained essentially flat, at around 330 million,” which further indicates insurance has yet to fully benefit from the country’s wider financial inclusion gains.
As a result, “Today, India’s insurance industry remains the only major financial-services sector (among banking, asset management, and insurance) that has not fully benefited from the country’s broader financial-inclusion story,” the report said. (ANI)
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