Chennai: India’s life insurance industry saw a sharp drop in new policy issuance in FY25, even as premium collections continued to grow.While insurers issued about 2.9 crore new policies in FY24, the number fell to 2.7 crore in FY25.
This marks the lowest level of new policy issuance in the past five years, and is lower even than the pre-Covid year of 2019–20, when more than 2.8 crore policies were sold, according to data from the Insurance Regulatory and Development Authority of India (IRDAI).Industry analysts attribute the decline largely to the widening array of investment alternatives now available to households. Rising participation in equities, mutual funds, exchange-traded funds (ETFs), bonds and systematic investment plans (SIPs), along with products such as the National Pension System (NPS), has increasingly drawn savings away from traditional life insurance products.Despite the fall in volumes, premium growth remained resilient. Premiums from new business—covering both first-year and single premiums—rose 5% year-on-year to Rs 3,97,763.9 crore in FY25, compared with Rs 3,78,405.4 crore in FY24, reflecting a shift towards higher-ticket and protection-oriented policies.V Gurunathan, director and CEO of TVS Insurance Broking, said the growing preference for capital market instruments was impacting new policy sales. “Investors are increasingly drawn to instruments where they expect better returns on investment. Life insurance has traditionally been viewed as a tax-saving product. With Section 80C benefits capped at an annual premium limit of Rs 5 lakh, and with no deductions available under the new tax regime for life insurance premiums under Sections 80C or 80D, its attractiveness as a tax tool has diminished,” he said.However, Gurunathan stressed that life insurance should primarily be seen as a protection product.
“What life insurance can do for a family cannot be replaced. That remains the strongest value proposition of the product,” he told TOI.He added that the rise in average premium size indicates a gradual shift towards higher-value policies, a trend also reflected in the steady increase in gross written premium (GWP) across the sector.IRDAI data shows that premiums from new life insurance policies rose sharply—by 53%—between 2019–20 and 2024–25, increasing from Rs 2,59,262.4 crore to Rs 3,97,763.9 crore.
Total premium income, including renewal business, climbed nearly 45% to Rs 8,29,929.5 crore in FY25 from Rs 5,72,910.2 crore in 2019–20.Anup Seth, chief distribution officer at Edelweiss Life Insurance, said premium growth has been supported by better product design, rising awareness of financial protection, and stronger engagement with existing customers. “Looking ahead to FY26, the outlook remains positive. Insurers are strengthening digital and bancassurance channels, improving customer experience, and launching products with living benefits that appeal to younger and evolving customer segments.
With distribution becoming more balanced and customer-centric, the industry is well positioned to broaden its reach and relevance,” he said.
