Archive · 24 Sep 2026
India’s Insurers Face Profit Pressure Despite Resilient Growth
India’s insurance companies are selling more policies, but their costs are rising quickly.
This means they are not always earning as much from each new policy.
The biggest private life insurers grew their new business strongly from fiscal years 2022 to 2026.
However, their operating expenses grew even faster than some business measures.
General insurers also increased their premiums mainly by selling more policies.
The average amount paid for each general insurance policy became smaller.
McKinsey says AI could help insurers assess risks, process claims and serve customers more efficiently.
The report also says insurers could reach more people by offering personalized and local-language services.
India’s top four private life insurers recorded 12–16% annual growth in new business premiums during fiscal years 2022–26.
Operating expenses grew by about 20% annually, contributing to a 3–4 percentage-point decline in value-of-new-business margins for most insurers.
McKinsey said rising distribution costs and stagnant sales productivity are making incremental insurance business less profitable.
General insurance gross written premiums grew about 12% annually, while policy volumes rose 14% and average ticket sizes declined 2% annually.
McKinsey recommended using AI across underwriting, sales, claims, customer service and other operations to improve productivity and scalability.
- Who
- India’s life and general insurers, with analysis from McKinsey & Company.
- What
- Insurance businesses are growing, but rising costs and weak productivity are pressuring profitability.
- When
- The report covers fiscal years 2022–26 and was released a day after new insurance distribution reforms.
- Where
- India.
- Why
- Distribution and operating costs are rising, while sales productivity and average general-insurance ticket sizes are under pressure.
Cost Reduction and Efficiency
Growth and Wider Access
Distribution reform
Cost Reduction and Efficiency
Caps on insurance commissions and limits on insurers’ expenses of management are intended to reduce the overall cost of insurance and improve policyholder returns.
Growth and Wider Access
Insurers must continue expanding distribution and reaching more customers, particularly beyond metro cities, despite pressure on costs and productivity.
Role of AI
Cost Reduction and Efficiency
AI can automate underwriting, claims and servicing workflows, helping control expenses and improve operating efficiency.
Growth and Wider Access
AI can also support personalized offers, hyper-local engagement and vernacular experiences to build trust and accelerate insurance adoption.
Business growth versus profitability
Cost Reduction and Efficiency
Faster expense growth and declining value-of-new-business margins indicate that additional business is becoming less profitable.
Growth and Wider Access
Strong premium, policy-volume and embedded-value growth shows that insurers continue to expand in a market with substantial protection needs.
- Life-insurance premium growth
- The top four private life insurers achieved approximately 12–16% CAGR in new business premium during fiscal years 2022–26.
- Life-insurance expense growth
- Total operating expenses grew at approximately 20% CAGR during the same period.
- Margin change
- Value-of-new-business margins declined by 3–4 percentage points for most private life insurers.
- General-insurance growth
- Gross written premium grew approximately 12% CAGR, driven by policy-volume growth of about 14% CAGR.
- General-insurance ticket size
- Average ticket sizes declined by approximately 2% CAGR.
- Insurance penetration
- India’s overall insurance penetration was 3.7% of GDP, compared with a global average of 7.3%.
- Suggested response
- McKinsey recommended embedding AI and technology across the insurance value chain to improve productivity and operating leverage.