As India enters 2026, the insurance sector is moving into a phase focused less on reform announcements and more on execution and risk preparedness. Following a series of regulatory and policy changes in 2025 — including the passage of the Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Bill, proposals to allow 100 per cent foreign direct investment (FDI), and the removal of GST on individual life and health insurance premiums — insurers are now preparing for a year shaped by changing risk patterns, evolving customer expectations and deeper market penetration.
While the structural groundwork has largely been laid, 2026 is expected to test how effectively insurers translate these reforms into sustainable growth, stronger underwriting discipline and broader access across life, health and general insurance. Rising domestic demand, expanding digital adoption and increasing exposure to newer risks such as cyber, climate and supply-chain disruptions are likely to define the sector’s priorities in the year ahead.
Momentum Built On Reforms And Domestic Demand
India’s insurance sector heads into 2026 supported by favourable macroeconomic fundamentals and rising domestic demand. According to Reserve Bank of India, GDP growth for FY26 is projected at 7.3 per cent, while global investment firm Morgan Stanley expects India to remain the fastest-growing major economy.
“The insurance sector appears to be in strong momentum owing to wider digital adoption, rising consumer awareness, a visible tilt towards protection-led products and reduction of GST on select insurance offerings,” said Mohd. Arif Khan, Deputy CEO, SBI General Insurance. He pointed out that non-life insurers reported nearly 24 per cent year-on-year growth in November FY26, the highest monthly premium collection of the year, underscoring strong underlying demand.
Despite global trade shifts and policy uncertainties, Khan noted that high domestic consumption and expanding risk awareness will continue to anchor growth, even as insurers recalibrate product design and underwriting to address evolving exposures across manufacturing, services, logistics and the MSME ecosystem.
Non-metro India And Rising Protection Depth
A key structural trend shaping 2026 is the continued shift of insurance demand beyond metro cities. Data from Policybazaar shows that Tier-2 and Tier-3 regions now account for 62 per cent of all new health insurance policies, overtaking metros as the primary demand centres.
More importantly, the hinterland is not merely buying insurance—it is buying stronger protection. Nearly one in two policies in Tier-2 and Tier-3 markets now carry a sum insured of Rs 10–15 lakh, a sharp jump from earlier years when Rs 3–5 lakh covers dominated. In Tier-2 India, policies in the Rs 10–14 lakh range rose from 27 per cent in FY22 to 47 per cent in FY26, while Rs 15 lakh-plus covers climbed from 1 per cent to 13 per cent. Tier-3 markets mirrored this trajectory.
This deepening of cover reflects rising medical inflation, post-Covid health awareness and improved affordability through monthly EMI options and modular plans. As insurers move into 2026, maintaining this balance between scale and adequacy will be central to sustainable penetration.
Risk Landscape Expands Beyond Traditional Covers
As India’s economy becomes more interconnected, insurers face a rapidly evolving risk environment. Cyber threats, climate-linked events, supply-chain disruptions and health-related uncertainties are reshaping customer expectations.
“New risk categories—right from cyber threats to climate-linked events—are likely to shape demand for better protection,” Khan said, adding that businesses will increasingly seek specialised covers to manage operational disruptions, liability exposures and digital risks. At the individual level, customers are expected to opt for comprehensive and long-term policies that provide greater financial certainty.
Climate resilience is expected to take centre stage in 2026, with insurers exploring wider use of parametric insurance to address extreme weather events. Such solutions promise faster, more transparent payouts for climate-impacted households and enterprises, reducing uncertainty at moments of stress.
Brokers, Consolidation And Advisory Depth
The changing risk environment is also reshaping the role of insurance brokers. Rohit Boda, Group Managing Director, J.B.Boda Group, said insurance broking is now operating in a far more complex environment than even a few years ago.
“Businesses today are deeply interconnected, with exposures spanning climate volatility, cyber threats, geopolitical shifts and fragile supply chains,” Boda said. Clients, he added, are increasingly seeking partners who can provide clarity and continuity across the risk lifecycle, not just policy placement.
Consolidation is expected to accelerate in 2026, with mergers and acquisitions driven less by scale and more by capability acquisition, technology integration and advisory strength. According to Boda, the success of such deals will hinge on cultural alignment and governance discipline, rather than size alone.
Technology, AI And The Execution Challenge
Technology will be the primary execution lever in 2026. Insurers are expected to adopt more agile, data-driven underwriting models powered by AI and big data, enabling real-time risk assessment based on behaviour, health, location and usage patterns.
Paritosh Desai, Chief Product and Marketing Officer, IDfy, said 2026 will be the real execution ground for the Insurance Laws (Amendment) Bill. While easier norms and more players can boost scale, they also raise risks around mis-selling and fraud.
To address this, insurers will need to move beyond siloed data and use AI and large language models to triangulate behavioural insights, affluence signals and geographic risks. Desai also flagged the growing importance of video onboarding and digital KYC as insurers expand into every pin code, making physical onboarding increasingly inefficient.
Health And Life Insurance: Growth With Caution
According to Ankita Srivastava, General Manager, The Healthy Indian Project, health insurance is expected to remain a key growth driver in 2026, supported by rising healthcare costs and demand for comprehensive family coverage.
However, she cautioned that claims inflation, premium affordability and regulatory uncertainty could temper momentum. Persistently high medical inflation may force premium hikes, risking slower renewals among price-sensitive consumers. Regulatory changes around commissions, pricing and accounting could also impact product attractiveness and profitability.
Srivastava further highlighted risks from fraud, digital security threats and uneven penetration across rural and urban markets, stressing the need for regulatory clarity, cost-effective models and stronger fraud control mechanisms.
From Reform To Responsibility
As India moves into 2026, the insurance sector stands at a critical juncture. The foundations laid in 2025—through regulatory reform, tax rationalisation and digital expansion—have created unprecedented opportunity. But the next phase will be defined by execution, risk stewardship and trust.
Insurers who successfully combine AI-driven underwriting, thoughtful product design and customer-centric distribution will be best positioned to navigate rising risks and widening expectations. The challenge is no longer just growth, but responsible scale—ensuring that insurance remains accessible, relevant and resilient as India’s economy and risk profile evolve. |
