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Indian Life Insurance: Entering a Phase of Strategic Acceleration

ICICIdirect Research 16 Jan 2026 DISCLAIMER

FY24-26 proved to be a transition year for the life insurance industry, marked by volatility in growth and margins. The moderation was largely driven by changes in taxation, introduction of new surrender value norms, EOM guidelines and the most recent change being GST exemption.
GST exemption is structurally positive for demand and penetration, though has introduced near-term profitability challenges. Loss of input tax credit (ITC) is estimated to have a ~100–300 bps impact on VNB margins (VNB margin is a metrics used to gauge profitability of a life insurer); however, insurers are actively working to mitigate this impact through a combination of product-mix optimization, adjustments to distributor payouts, and cost rationalization. Thus, management commentaries indicates that the GST ITC impact is expected to be largely mitigated by FY26 exit.
While transitory impact of margins could be ruled out, life insurance industry has started to witness acceleration in premium growth. This is evident from pick up in pace of premium accretion in individual segment up from 6.7% in Q1FY26 to 22.5% in Q3FY26, partially aided by GST exemptions on insurance premiums, which improved affordability and stimulated demand.
Looking ahead to FY26-28, Indian life insurance sector, appears to enter a phase of strategic acceleration, underpinned by structural under-penetration (life insurance penetration at ~2.7% in FY25), favorable demographics and a progressively enabling regulatory framework. With policymakers pushing the agenda of “Insurance for All by 2047,” and industry overhang being behind, the sector stands at the cusp of a sustained growth phase.
Select private life insurers have articulated ambitions to return to a phase of accelerated compounding, targeting doubling of premium accretion over next 4–4.5 years, with focus on product and channel optimization expected to aid gradual expansion in VNB margins (profitability), reinforcing the sector’s medium-term structural growth thesis.

In listed domain, HDFC Life remains our preferred pick given balanced product mix, diversified distribution and strong parentage, available at attractive valuation from long term investment perspective. 

View our research recommendation on HDFC Life Insurance Company Ltd Also explore more on Research page

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