Banks and finance companies to help in insurance penetration in small towns

Mumbai: Banks and finance companies are expected to play a key role in expanding insurance coverage in smaller Indian towns, said Keki Mistry, chairman of HDFC Life, at the company's 25th annual general meeting in Mumbai on July 16. Life insurers are leveraging the distribution reach of partner banks and microfinance lenders to enter underpenetrated Tier 2 and Tier 3 markets.

India continues to face a significant insurance gap, with penetration at just 2.8% and a protection shortfall of 91%, the highest in Asia, said Mistry. “Insurers are tapping into the opportunity by rapid expansion into Tier 2 and Tier 3 cities leveraging distribution presence of partner banks and micro finance lenders to offer appropriate insurance solutions,” said Mistry. “Our strategy is clear: to expand thoughtfully and purposefully while transforming our entire ecosystem through cutting-edge technology.”

Despite global headwinds, India’s economic outlook remains strong. The country posted 6.5% GDP growth in FY25 and is expected to maintain momentum in FY26 on the back of rising private consumption and continued capex by the Govt. “India continues to remain the fastest growing major economy in the world,” said Mistry.

He expects the life insurance sector to grow at an average annual rate of 7.3% between 2025 and 2029, supported by higher income levels, a youthful population, growing digital usage and regulatory changes. “The regulator has been actively promoting the vision of ‘Insurance for All by 2047’,” he said, citing measures like composite licenses and a risk-based capital framework as steps to improve ease of doing business and boost insurance penetration.

HDFC Life recorded a 17% increase in individual weighted received premiums during FY25 and a 9% growth in the number of policies. Its market share rose to 11.1%, and its assets under management stood at Rs 3.36 lakh crore. The company reported new business margins of 25.6% and a value of new business of Rs 3,962 crore. “Despite challenges such as increased surrender values and an adverse product mix, our new business margins demonstrated resilience,” said Mistry.

The company covered more than 5 crore lives during the year. Persistency ratios improved to 86.9% at 13 months and 63.5% at 61 months. Renewal collections rose 14% year-on-year, indicating continued customer engagement.

Mistry said the company would remain focused on innovation and technology to drive growth and improve service. “Together, as one united force, our nation, our industry, and our company, we will rise above uncertainties and challenges,” he said.


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