Life insurance policyholders are demonstrating increased commitment to financial protection, with average annual premiums rising 42.6% over the last five years. According to Insurance Information Bureau (IIB) data analysis, the average annual premium per in-force policy increased to ₹22,195 in FY2025 from ₹15,567 in FY2021. Despite this premium increase, the number of in-force life insurance policies remained broadly stable at around 343 million over the five-year period, indicating that existing policyholders are increasing their coverage amounts rather than simply adding more policies. As per the Insurance Awareness Committee (IAC)-Life, this trend reflects policyholders progressively strengthening their financial protection by opting for higher levels of coverage.
The data reveals a significant shift towards higher sum-assured categories among policyholders. In FY2021, 65.1% of all in-force life insurance policies had a sum assured of ₹2 lakh or less, which declined to 53.6% by FY2025. Simultaneously, higher-value categories gained substantial market share - policies with a sum assured of ₹2 lakh-₹5 lakh increased their share by 5.6 percentage points, while the ₹10 lakh-₹25 lakh category gained 2 percentage points. The most dramatic growth occurred at the premium end of the market, with policies having a sum assured of more than ₹50 lakh rising 68% to 7.4 million in FY2025 from 4.4 million in FY2021, generating an annual premium of ₹97,500 crore. As per the latest IIB analysis, this trend demonstrates that policyholders are strengthening their insurance cover over time rather than viewing life insurance as a one-time or tax-saving purchase.
The trend indicates that existing policyholders are strengthening their financial protection rather than expanding their insurance footprint. Kamlesh Rao, Chairperson of Insurance Awareness Committee (IAC)-Life, noted that the IIB data demonstrates Indians increasingly recognise life insurance's value and strengthen their protection as their lives and responsibilities evolve. The data suggests a change in the profile of life insurance ownership, with the proportion of policies carrying very low levels of cover declining while every higher sum-assured category recorded growth between FY2021 and FY2025. Growing awareness of the importance of life insurance, rising incomes, inflation, and evolving life stages and responsibilities have all contributed to greater demand for comprehensive protection. The Covid-19 pandemic and its aftermath further highlighted protection gaps, prompting individuals to reassess their financial resilience, while insurers have introduced more tailored solutions catering to diverse customer needs.
Despite the positive trends, significant protection gaps remain across India's population. 87% of India continues to grapple with a significant life insurance protection gap, which continues to increase, exceeding 90% amongst those aged 18-35. This growing vulnerability is a threat to families' financial security and aspirations. The Insurance Awareness Committee was formed under the aegis of the Life Insurance Council to address this challenge on a war footing, maintaining society's socio-economic resilience and security. As per the committee, customers have understood the unique value proposition of life insurance as a long-term protection and financial security tool that complements other investment avenues, while most traditional savings or investment products help create wealth whereas life insurance protects against risks and volatility.
