India's next health insurance growth wave will come from smaller cities, says PB Fintech's Sarbvir Singh

India's next phase of health insurance growth will be driven by first-time buyers in Tier 2 and Tier 3 cities, according to Sarbvir Singh, Joint Group CEO of PB Fintech. He said bringing previously uninsured households into the system, ensuring they understand their policies and supporting them during claims will determine the industry's long-term expansion.

“Insurance penetration moves only when someone who was outside the system comes in,” Singh said, highlighting the importance of expanding coverage beyond existing policyholders.

His comments come as Policybazaar data shows a 277% increase in fresh lives insured through its platform between FY22 and FY26, with first-time buyers increasingly opting for higher coverage.

Smaller cities driving insurance penetration

Singh said the changing profile of first-time buyers indicates where the industry's next growth opportunity lies.

“Over the last four years, a growing number of people have taken that step by buying their first health policy, and more of them each year are in Tier 2 and 3 cities,” he said.

Policybazaar's analysis shows that first-time buyers from these cities increased 351% between FY22 and FY26, outpacing overall growth.

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Their share of new buyers rose from 56% in FY22 to 67% in FY26. Nearly seven in 10 additional first-time buyers during this period came from smaller cities.

Younger households choosing higher coverage

According to Singh, many new customers are entering the insurance ecosystem during important stages of their working and family lives.

“They are in their late twenties and thirties, with families to protect, and they are starting with larger covers than first-time buyers did in FY22,” he said.

Policybazaar data shows that buyers aged 26–35 account for 27.66% of first policies, while those aged 36–45 represent another 21.98%.

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The average sum insured selected by first-time buyers has more than doubled, rising from ₹6.3 lakh in FY22 to ₹13.1 lakh in FY26.

The proportion choosing coverage of ₹10 lakh or more increased from 32% to 68% over the same period.

First policy must begin a long-term relationship

Singh cautioned that attracting new customers is only the beginning of the industry's responsibility.

“That is where the next stretch of growth for health insurance sits. It is also where the work is hardest, because a first-time buyer has no experience to lean on,” he said.

“Our job is to take them to a policy they understand, and then stand by them at the time of claim.”

He stressed that customers' initial experiences could influence whether they remain insured over the long term.

“The new entrants into the health insurance ecosystem are the ones who will stay insured for the decades to come. Their experience will shape the insurance industry’s future,” Singh said.

He added that insurance penetration would expand faster when companies treated the first policy as the beginning of a lasting customer relationship.

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