The New Era of Insurance: Who Will Come Out On Top?

A quarter century is a long time for policy. It’s no different in the case of the big bang opening up of India’s state-controlled insurance industry in 2000. Two deals serve as book-ends for that phase. Almost 25 years to the day when the Bajaj group, famous for its two-wheelers, formed a joint venture with German insurance giant Allianz, the two companies decided to part ways, in a development that points to a new phase for the sector. Bajaj Allianz’s journey was emblematic of the heady initial years of liberalisation in the space, coming less than a decade after the country opened itself up to foreign investments and decided to loosen the government’s grip on various sectors. As an initial move, accepting the recommendations of a commission set up to look into the space, the central government allowed private sector participation and 26% foreign direct investment (FDI) in insurance in 2000. Till then, the landscape was dominated by the Life Insurance Corporation of India on the life insurance side and four public sector insurers on the general insurance side. Bajaj and Allianz launched not one, but two ventures: Bajaj Allianz Life Insurance and Bajaj Allianz General Insurance. For almost a quarter century, it appeared to be a partnership that had stood the test of time. But there were rumblings underneath the surface, even though there were no public disagreements. Reports suggested that Allianz made several attempts to increase its stake in the ventures at discounted valuations, which did not materialise. In March, Allianz decided to exit both ventures, selling its 26% stake back to Bajaj Finserv at a valuation of over Rs 24,000 crore, making it the largest deal in the insurance industry. This is not an isolated case. Over the years, several foreign insurers have exited their Indian JVs. In 2012, New York Life sold its 26% stake in Max New York Life to Japan’s Mitsui Sumitomo for Rs 2,731 crore. AXA exited both Bharti AXA General and Life Insurance, with the general business merging into ICICI Lombard and Bharti Life Ventures acquiring full ownership of the life arm. And yet, for every exit, there are more foreign firms waiting to enter the market, lured by the limitless potential of a market of over a billion people where insurance penetration is painfully low. “There have been many exits in the past, and in each case, the Indian company has thrived and found its own path. The exit per se should not have a material impact, especially as the exiting shareholder has indicated its continued commitment to the Indian market,” says S. Sreenivasan, President–Insurance &amp; Special Projects, Bajaj Finserv Ltd. Indeed, many hope that the Indian government’s decision in the Union Budget of 2025-26 to allow 100% FDI in the sector marks the beginning of a new wave of growth. Mergers and acquisitions (M&amp;As) are expected to gain pace in this phase and intensified competition is seen to be the dominant theme. Even the public sector Life Insurance Corporation of India (LIC), the biggest in the life insurance space by quite a distance, has decided to buy a stake in a standalone private health insurer as it looks to strengthen its hold. It is in discussion to acquire a 40-49% stake in ManipalCigna Health Insurance. Besides, the proposed composite licence to allow insurers to offer products across categories could blur the lines between the companies and allow a bigger play for those with ambition and deep pockets. Add to that the continuing digital disruption in the space and the ingredients for a battle royale are in place. The indian insurance industry has come a long way since Independence. The first major policy move in this space was the amalgamation of 241 life insurers, both domestic firms and branches of foreign firms, to create the LIC in 1956. A decade-and-a-half later, the government trained its sights on the general insurance space. Here, 107 general insurers, including branches of foreign insurers, were amalgamated and grouped into four public sector companies—National Insurance Company, New India Assurance Company, Oriental Insurance Company, and United India Insurance Company. The General Insurance Corporation came a year later, which in turn held share in the four general insurers. The two decades after that momentous decision were marked by a diversification of business beyond metros, as the public sector monopolies were tasked with increasing insurance penetration. But by the time the government embarked on a liberalisation drive to loosen its grip on business, there were signs of dissatisfaction among many customers. The Centre set up a commission headed by former Reserve Bank of India Governor R.N. Malhotra to recommend ways of opening up the insurance sector. A survey it commissioned found that claim settlements took time, and most respondents said they also faced issues in fair settlement of their claims. This included companies as well. Besides, there were complaints about the integrity of surveyors deployed by these insurers. In 1994, the Malhotra Commission recommended a host of measures such as allowing private sector participation in the sector and 26% foreign direct investment. It also recommended the setting up of a regulatory body for the sector. It took six years for that report to be acted upon, in 2000. The Insurance Regulatory and Development Authority of India (Irdai) was also born then. From 27 in 2001–02, the number of firms had increased to 48 by 2010, in what is called the second wave of growth in the insurance sector. The number now stands at 73—26 in life, 25 in general, eight in health, and 14 in reinsurance and specialised insurance. Of these, 10 insurers have been listed on the stock exchanges, with a combined market capitalisation of Rs 11 lakh crore as of April 9. Yet, despite this transformation, insurance penetration remains at a modest 3.7% of GDP—2.8% for life and just 1% for general—well below the global average of 7%, indicating ample room for more players. Moreover, despite the regulator’s goal of achieving “Insurance for All” by 2047, the industry’s penetration rate has actually declined from 4.2% in 2022—highlighting that growth in the sector has not kept pace with the broader economy. Even in terms of density, or the average amount of premium collected per person, India lags far behind comparable countries. In fact, it was a measly $95, per an EY report, compared to $9,640 in the US, $508 in China, and a global average of $889. “Think of the insurance industry in three phases,” says Vineet Patni, Managing Director at advisory firm Wepartner Consult. The first phase of growth—marked by the opening up of the sector in 2000—was highly profitable, with early entrants like Bajaj Allianz, Max Life, ICICI Prudential and HDFC Life benefiting from high commissions and relaxed regulation. The second phase brought tougher times. After a period of rapid growth between FY07 and FY11, the Indian life insurance industry hit a slowdown over the next three years. This deceleration was driven by a combination of regulatory changes by Irdai—particularly the steep cut in commissions on unit-linked insurance products (ULIPs)—and underperformance in the equity markets. The changes led to an erosion of profit and derailed business plans, though it coincided with an increase in the FDI limit to 49%. “This also created the perception that India wasn’t a great insurance destination,” says Patni. Now, in phase three, the mood is shifting, and newer players are entering the scene. Venture capital is flowing in, with funds looking to build and exit. “With 100% FDI now allowed, we can see more players along with ownership shifting toward investment funds,” Patni adds. For years, foreign insurers keen to tap into India’s massive market had to hunt for the right local partner and navigate the maze of joint venture regulations. That barrier is finally gone. With full ownership now permitted, global players can set up shop directly, without being tied to domestic partners. This is expected to deepen competition, push innovation, and expand access to insurance—especially in underserved regions with foreign capital flowing in. From 2000 to September 2024, India’s insurance sector attracted Rs 82,847 crore FDI. Sarbvir Singh, Joint Group CEO of financial services aggregator PB FintechThe decision to increase the FDI limit to 100% will lead to better capital influx and further strengthen the industry, says Sarbvir Singh, Joint Group CEO of financial services aggregator PB Fintech. “The infusion of international funds will boost competition and drive innovation, resulting in improved consumer offerings across the country. This will also enhance service quality and offer consumers greater choice while potentially making insurance more affordable,” he adds. With the doors wide open now, foreign insurers can also choose how they want to enter India—either by starting afresh as fully-owned companies, by increasing their stake in existing JVs, or by buying out small players. Many JVs may now be re-evaluated, or buyouts of Indian partners could happen, especially where global insurers want full control or a greater role in strategic decisions. Private equity (PE) firms got the regulator’s go-ahead in 2017 to invest directly in insurance companies. After that, KKR acquired a 9.9% stake in Shriram General Insurance in 2022. Warburg Pincus and Premji Invest hold stakes of 10% and 16%, respectively, in SBI General Insurance, and Warburg also owns 26% of IndiaFirst Life. Similarly, ACKO General Insurance is backed by General Atlantic, Multiples Private Equity, Accel, and others. Animesh Das, CEO of ACKO General Insurance“We expect to see more activity—whether it’s foreign players increasing their stake in existing ventures or launching new ones altogether,” says Animesh Das, CEO of ACKO General Insurance. Reflecting this potential, Prudential Plc, a UK-based FTSE 100 company, recently announced a joint venture with Vama Sundari Investments (Delhi) Private Ltd, a promoter company of the HCL Group, to set up a standalone health insurance business in India. When india’s insurance industry was opened to private participation, foreign expertise was critical. With only state-owned insurers operating, Indian companies leaned heavily on global partners to learn underwriting, risk management, and claims processing. But that dependence is fading now. The knowledge once imported is today deeply embedded in domestic operations, especially in hubs like Mumbai and Gurugram. “The big firms that once leaned on their foreign partners for know-how, have grown up. They don’t just rival their foreign counterparts in operational excellence—many have often outperformed them,” says Patni. Indeed, the domestic insurance landscape is marked by diverse models. For instance, in the life insurance space, while LIC concentrates on semi-urban areas, private firms are more metro and urban focussed. In fact, LIC accounts for two-third offices in semi-urban areas and about 25% in metro and urban areas. Similar data was not available for general insurers. On the business front, private life insurers have collectively trumped LIC in terms of annualised premium equivalent, a measure for new business sales growth. In March 2025, LIC had a 30% share in APE and private players made up for the rest. However, in terms of assets under management (AUM), it is the exact opposite, with LIC accounting for around 70% of AUM as of FY24, the latest year for which industry-wide data is available, per Irdai’s annual handbook. Among general insurers, the four public sector undertakings (PSUs) account for 30% premiums. Here, private insurers have collectively trumped the PSUs even in terms of AUMs in FY24, though the public insurer New India Assurance is the leader among all the firms, followed by ICICI Lombard, per the Irdai handbook. That diversity has been deepened further in recent years with the rise of digital-first insurers like ACKO, which have challenged legacy models by skipping brick-and-mortar networks altogether. Built from the ground up on technology, these firms offer simplified policies and quicker claims—areas where traditional players often lag. A report by the consultancy McKinsey says digital disruptors such as Go Digit and ACKO have grown their gross written premium (GWP), or the total amount an insurer collects from customers for policies, at a compound annual growth rate of more than 60% in the past four years, edging past established competitors through technology-driven, customer-centric approaches. These firms use smartphone-enabled inspections, AI and machine learning-based fraud detection, instant approvals, easy digital claims, and ecosystem partnerships for strengthened service. “Irdai’s plan to issue more than 20 new licences could further disrupt the competitive landscape,” notes the McKinsey report from November 2024 titled Steering Indian insurance from growth to value in the upcoming ‘techade’. Experts agree that homegrown brands enjoy a unique advantage. “Understanding the nuances of Indian customers—their concerns and aspirations—allows these companies to design solutions that truly resonate with them,” says Singh of PB Fintech. Rural and semi-urban India represents 60% of India’s population but remains highly under-insured. “Mobile-first models, vernacular content, and phygital outreach are unlocking new markets. Irdai’s progressive stance (like regulatory sandbox initiatives) is also encouraging homegrown brands to innovate for the sector,” he adds. Interestingly, the success of these digital natives could attract global interest. Patni notes that many local players may become acquisition targets. “Multinational companies may prefer to acquire and scale up an already tech-savvy Indian insurer rather than build from scratch,” he says. That mirrors a trend seen elsewhere in India’s financial ecosystem as well—where deep local knowledge and digital prowess are proving decisive. Traditional players are also jumping on the tech bandwagon. For example, ICICI Lombard has carved its digital business into a separate unit so that it can compete just like a start-up. But a large part of its business still comes from non-digital channels. The regulatory landscape can further encourage innovation. Boutique insurance licences for companies focusing on specialised policies like unit-linked or motor insurance can lower capital requirements for focused players and unleash a new wave of digital-first insurers, as per experts. Ultimately, success in India’s insurance market may hinge on solving the twin challenges of affordability and access. “The Indian insurance market is highly price-sensitive, with as many as 45% of respondents in a Policybazaar survey citing affordability as a barrier to insurance purchase,” says Singh. He adds that new-age, affordable, and value-added products are the need of the hour. Another turning point for India’s insurance sector could be a proposed composite licence regime. This framework would allow insurers to operate across multiple segments—life and general insurance—under a single licence, rather than having to set up separate entities for each line of business. For insurers backed by banks that operate in only one domain, this opens up a significant growth opportunity. This allows them to better leverage their distribution networks and deepen customer relationships across product categories. For promoters who already have life and general businesses, the composite licence regime could bring operational efficiencies. Common functions like IT, HR, investments, marketing, and compliance could be shared across life and non-life segments. This kind of back-office integration—while keeping separate CEOs or business heads for life and general arms—could significantly reduce costs and improve profitability. However, these players will also need to evaluate whether to merge their businesses into a single composite entity or continue running them as separate arms with shared infrastructure. As new players enter, they need to focus on innovation to cater to the diverse needs of India’s growing population. For instance, as per the McKinsey report cited earlier, with life expectancy rising from 62 years in 2000 to 70.6 years in 2021, customers aged 41 and above will require increasing levels of care. Allowing composite licences and enabling the conversion of life insurance products into long-term care (LTC) products can make healthcare more affordable. In a customer survey conducted, by McKinsey, 67% of respondents said they would be more likely to purchase insurance if offered a life-health composite product. In Asia, some life insurers already offer premium retirement centres as part of their life insurance coverage. In China, for example, life insurers provide products that allow customers to convert their life insurance into LTC products. Moreover, the industry has already made strong progress with innovations such as tailored plans for diabetes, heart and cancer patients, Rs 1 crore covers, shorter maternity waiting periods, and OPD coverage. Going forward, the focus needs to shift to bridging the protection gap for underserved segments—people with disabilities, mental health conditions, HIVAIDS, and those seeking AYUSH care—ensuring broader accessibility. AYUSH stands for Ayurveda, Yoga, Naturopathy, Unani, Siddha, and Homoeopathy. “Technology, especially AI and ML, will be key enablers. From hyper-personalised policies to dynamic risk-based pricing, tech will help insurers better understand and serve customers,” says Singh of PB Fintech. The goal is not just to sell more, but deliver better—multilingual, human-centric, tech-enabled experiences that match evolving expectations. India remains an attractive market for health insurers, given the vast uninsured population and the need for innovation. India’s life insurance industry is distribution led with bancassurance and agency emerging as the dominant channels. Unlike in some mature markets, it is difficult and expensive to build digital and or physical distribution channels in India. This creates both opportunities and challenges for new entrants. Rushabh Gandhi, MD &amp; CEO of IndiaFirst Life InsuranceRushabh Gandhi, MD &amp; CEO of IndiaFirst Life Insurance, explains, “There are two main options: build your own distribution network—which takes time and deep pockets—or acquire an existing player with strong distribution in place.” Though this landscape presents significant challenges for foreign players looking to enter India, the former can still help modernise distribution by bringing in digital tools and artificial intelligence (AI)-powered solutions to boost agent productivity. According to McKinsey, despite a threefold rise in active life agents in the past four years, India’s annual premium equivalent (APE) per agent is still less than half of what it is in countries such as China and Indonesia. Shruti Ladwa, Partner and Insurance Leader at EY India, notes, “Most foreign insurers see India as a high-growth market. The focus is now on profitability and operational efficiency. We will see both consolidation and fresh entrants.” But it is not certain that foreign players, despite the 100% FDI now and clear appreciation of the potential, will take the plunge. In fact, after the FDI limit was increased to 74% in 2021, there was very limited foreign interest. Only a few players raised stakes, like Italy’s Generali that took a 74% stake in its joint venture with the Future Group. Belgium’s Ageas raised its stake in its Federal Bank JV to 74%, and British Aviva PLC raised stake in its JV with Dabur India. “When FDI was increased from 49% to 74%, it led to limited movement. So, it’s unclear whether raising it to 100% will bring a big shift. But directionally, it’s a positive step—it could encourage those who haven’t entered the market yet to start considering it,” says Das. There are many challenges that need to be addressed for the sector take off. “Incoming players must be willing to go deep—understand the nuances of the Indian market and execute well. That’s not easy,” says Das of ACKO. Moreover, considering insurance is a capital-heavy industry, it is slow to break even, often taking 10-15 years. Hence, insurers who have not broken even and where capital is an issue, can look for buyers. “Many smaller insurers with annual premiums under Rs 700 crore are struggling. They’re not making money and can’t seem to scale up. Consolidation is inevitable—not just due to FDI but because size and scale now matter more than ever,” says an industry expert on the condition of anonymity. Sreenivasan of Bajaj Finserv also believes that industry-wide consolidation is a possibility at this juncture. “At some point, the availability of capital will determine whether the pace of consolidation will increase.” Of course, these factors do not dim the potential the Indian market offers. There is still enough room to build models that are more meaningful and relevant for Indian consumers. “Globally, we’ve seen successful examples from the US and the UK where insurance players have built innovative and impactful businesses. Some of those ideas can certainly be adapted and implemented here,” says Das. The long-term outlook for the Indian insurance industry remains highly positive. “There is no broad-based exit or cash-out trend. Based on our discussions with international players, we see only optimism given India’s demographics, low penetration, and business potential,” says Kailash Mittal, Head of Insurance &amp; Actuarial at the professional services major KPMG India. That fact is also underlined by Allianz, which has indicated that it isn’t exiting India entirely. In a statement, the company emphasised: “Allianz will explore new opportunities that strengthen its market position, not only as an investor but also as an operator.” Reports suggest that Jio Financial Services and Allianz are in talks to form an insurance joint venture in India, although no formal comment has been issued. There is perhaps no better evidence to show that the opportunity is vast. Foreign firms keen to tap into the market will come up against an altogether different ecosystem to the one that prevailed two decades ago. They will have to contend with domestic firms that have matured and start-ups that are constantly on the hunt to disrupt established practices. @teena_kaushal

The New Era of Insurance: Who Will Come Out On Top?

India's insurance industry, with cumulative premiums of $130 billion, is entering a new era of growth, marked by big M&As, the expected entry of more foreign players, and tech-led disruptions. Who will come out on top?