What is the insurance density in India as per the Economic Survey 2025-26?

Insurance density in India rose to $97 in FY25, reflecting increased spending by financially integrated households.

Why is insurance penetration declining despite increased spending?

High distribution costs and reliance on intermediaries prevent policies from being affordable for a larger segment of the population, leading to stagnant or declining penetration.

How much did insurers pay in commissions and distribution costs in FY25?

Life and non-life insurers together paid over ₹1-lakh crore in commission and distribution payouts in FY25.

Home / Business and Economy / Insurance Costs Block 'Missing Middle'

Insurance Costs Block 'Missing Middle'

30 Jan

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Summary

High distribution costs hinder insurance growth and affordability.
Insurance density rose to $97 in FY25, but penetration declined to 3.7%.
Insurers paid over ₹1-lakh crore in commissions and distribution in FY25.

The Economic Survey 2025-26 highlights that high distribution costs and reliance on intermediaries are significantly impeding insurance sector growth and policy affordability. While insurance density increased to $97 in FY25, reflecting greater spending by financially integrated households, insurance penetration stagnated, declining to 3.7%.

This situation presents a paradox where the sector deepens revenue from existing customers but fails to widen its customer base. The survey emphasizes that lowering distribution outgo is essential to make policies affordable for the 'missing middle' and reverse the penetration decline. The Reserve Bank of India echoed these concerns, noting premium growth is driven by high-cost strategies rather than operational efficiency.