Despite this growth, India’s life insurance penetration remains below global benchmarks, at 2.8% of GDP in FY24 compared with 5.6% in developed markets, and insurance density stands at just $70 per capita versus $3,182 in advanced economies.
“Structural factors such as the absence of social security nets, a growing middle class, and rising life expectancy will continue to fuel demand for protection and annuity products,” the report said, adding that under-penetrated segments offer significant long-term growth opportunities.The report noted a gradual shift in product preference among Indian consumers. While unit linked Insurance plans (ULIPs) remain popular, their share is moderating as demand rises for non-linked products, including non-participating policies with guaranteed returns and protection-focused plans such as term insurance and return-of-premium variants.
Annuities are also expected to grow, supported by increasing longevity and structured retirement solutions.
Distribution channels are evolving, with bancassurance still dominating sales but private insurers increasingly investing in agency networks and digital platforms to expand into tier-2 and tier-3 cities.
Impact of GST exemption
The recent goods and services tax (GST) exemption on life insurance premiums, effective September 2025, may impact short-term profitability due to loss of input tax credits.
PL Capital estimates a 20-100 basis point effect on FY26 embedded value (EV) across insurers.However, the move is expected to enhance affordability, improve policy persistency, and deepen penetration in the long term.
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Valuation and top picks
According to PL Capital, valuations for listed life insurers have corrected, with the sector trading at a one-year forward price-to-embedded value of around 2.0x, compared with 2.6x in 2020, presenting potential opportunities for investors.
The report identifies HDFC Life Insurance and Max Financial Services as top picks, both rated ‘buy’ with target prices of ₹900 and ₹1,850 respectively, citing strong product diversification and distribution reach.
ICICI Prudential Life Insurance is also rated ‘buy’ at ₹725, while SBI Life Insurance receives a ‘hold’ rating at ₹1,925 due to higher reliance on bancassurance.
“With structural demand intact and regulatory reforms supporting deeper market development, the life insurance sector is positioned to play an central role in India’s financialisation story,” PL Capital said.
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