During April-December FY2025, the private insurers reported 13.9% increase in the first-year premium income to Rs 117130.96 crore, and LIC posted 7.2% rise to Rs 157955.95 crore. The overall life insurance first year premium collection moved up 9.9% to Rs 275086.92 crore in April-December FY2025.

Among the 24 private life insurers, 9 players have recorded drop in new premium collection during December 2024. On the other hand, premium collection of 15 private insurers increased in the range of 2.5% to 224.2% in December 2024.

The life insurers sold 21.25 lakh policies in December 2024, registering a 19.8% decline compared with December 2023. The private players together posted 1.2% growth to 9.61 lakh policies, while the policies sold by LIC declined 31.6% to 11.63 lakh policies.

Life insurers have sold 181.84 lakh policies in April-December FY2025, showing a 1.8% fall against last year. The sales of policies from LIC declined 6.7% to 117.35 lakh policies, while all private players together sold 64.49 lakh policies, recording a increase of 8.7%.

The Gross premium underwritten by non-life insurers (including specialized PSU insurers), eased 0.3% to Rs 25019 crore in December 2024 against December 2023. The premium collection of General Insurers declined 1.6% in premium collection to Rs 20678 crore in December 2024, while that of stand-alone Private Health Insurers improved 5.2% to Rs 3069 crore in December 2024. Specialised PSU insurers have recorded 8.3% increase in premium collection to Rs 1272 crore in December 2024. The non-life insurance sector reported 7.8% increase in the premium collection to Rs 230181 crore in April-December FY2025.

Industry Expectations:

Address issue of decline in insurance penetration: According to Annual Report of IRDAI for 2023-24, insurance penetration in India has declined to 3.7% from 4% in 2022-23 and 4.2% in 2021-22. This is mainly led by life insurance penetration witnessing drop to 2.8%, while non-life insurance penetration has remain steady at 1%. IRDAI has started a mission for ‘Insurance for all by 2047’. Thus, to address the issue of decline in penetration and increase insurance penetration, the government may announce the specific measures to revive the insurance sector:

Enhanced deduction of Life Insurance Premium: In order to encourage growth in the life insurance segment it is recommended that the Government should increase the limit of deduction for life insurance premium/by creating a separate limit for deductibility of life insurance premium. Increase in tax incentives for insurance products like Term plan, Health etc will result higher demand for insurance products which can be positive for insurance companies.

Exemption of insurance policies from GST: After the implementation of GST, the prices of insurance products have gone up. Abolition of GST will give a strong boost. Life insurance penetration is low in India and GST of 18% on insurance premium is a drag. GST on Term/Pure Life Insurance and health insurance premiums may be rationalized.

Capital infusion in public sector insurers: Infusion of capital in public sector general insurance companies would help to improve solvency ratios and provide them with the necessary growth capital.

Rationalization of limits for investments of insurance companies: Insurers have restrictions on investment in capital markets and overseas securities, so the returns generated are not competitive. Budget may relax these investment norms enabling insurance companies to generate better returns for policyholders.

Increase tax exemption limit for health insurance: An increase in tax exemption limit for health insurance segment would benefit the sector. The waiver of service tax on health insurance premium would be positive for insurance industry. The government may also announce more tax incentives to facilitate people to buy adequate health insurance which has gained significance amid pandemic.

Parity between Mutual Funds and Insurance: The budget may remove tax arbitrage between mutual funds and insurance in terms of switching, STT and capital gains. If implemented, this could be negative for the insurance sector and positive for the AMC sector.

Roadmap on corporate tax rate on life Insurance companies: The government may hike tax rate for insurance companies and provide some details on the timelines of tax rate increase on life insurance companies. It will be overall negative for life insurance businesses operating at lower tax rates. An increase in tax rate from current 15% will impact EV and VNB of life insurers.

Roadmap for consolidation of PSU general insurance companies: There could be potential announcement around roadmap of consolidation of PSU general, which will be positive helping to build efficiencies.

Key stocks to watch

ICICI Prudential Life Insurance, HDFC Standard Life Insurance, SBI Life Insurance, New India Assurance, General Insurance Corporation

Outlook

The insurance penetration in India was improving, but it remains substantially lower compared with other leading countries. More importantly it has declined for last two years. The insurance industry has continued to demand separate limit of deduction for life insurance premium. There is a need for providing further impetus to life insurance companies for enhancing the insurance penetration in the country. In the general insurance segment, the announcement on capital allocation and consolidation of public sector general insurers is likely in the budget. The government may also announce more tax incentives to facilitate people to buy adequate health insurance which has gained significance amid pandemic.