India’s life insurance sector saw a 0.9% year-on-year (YoY) decrease in annual premium equivalent (APE) for January 2025, following a significant 25.2% increase in January 2024.
Private life insurers played a crucial role in offsetting the decline in premiums from the Life Insurance Corporation of India (LIC), which experienced a reduction in group single premiums. The slowdown was attributed to several factors, including recent policy adjustments in sum assured and commissions, as well as the revised surrender value guidelines implemented on October 1, 2024. Additionally, challenges in the bancassurance channel and heightened competition have further impacted the market, according to Saurabh Bhalerao, associate director at CareEdge Ratings.
LIC continues to rely heavily on its agency channel, which accounts for more than 90% of its individual new business premiums, while private insurers have diversified, with over 50% of their premiums sourced through bancassurance.
Sales of individual non-single policies declined by 9.6% YoY to 24.3 lakh policies, primarily due to changes in surrender value regulations. Over the past two years, the industry’s compound annual growth rate (CAGR) from January 2023 to January 2025 was 11.4%, with private insurers recording a notable 18.3% growth. In contrast, LIC’s performance remained largely flat.
Sanjay Agarwal, senior director at CareEdge Ratings, highlighted that private insurers achieved an 18.7% YoY growth in APE for January 2025, driven primarily by smaller firms. Agarwal expects insurers to shift their focus toward the agency channel as banks place greater emphasis on deposit gathering and companies look to reduce their reliance on bancassurance.
While the recent regulatory changes concerning surrender values have introduced short-term volatility, CareEdge Ratings forecasts a 11% to 13% growth in the industry over the next three to five years. This growth is expected to be supported by regulatory reforms under the proposed Insurance Amendment Act.
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