India’s Life Insurance Industry Poised for Multi-Decade Growth: PL Capital Report
- 11th September 2025
- 06:00:00 PM
- 3 min read
Summary
India’s life insurance industry is entering a long growth cycle, with penetration still at just 2.8% of GDP versus 5.6% globally. According to PL Capital, private players are expected to clock ~14.5% CAGR in premiums through FY35, supported by rising demand for protection, annuities, and guaranteed-return products. The report highlights HDFC Life and Max Financial Services as top picks for investors.
Mumbai | September 11 – The Indian life insurance sector remains one of the most underpenetrated in Asia. With penetration at 2.8% of GDP in FY24, compared to the global average of 5.6%, PL Capital sees a multi-decade growth opportunity.
“Low penetration, rising financialisation of savings, and growing demand for guaranteed-return products will drive expansion. Private players with strong product innovation and distribution reach are best placed to capture this,” the report said.
The mortality protection gap stands at $16.5 trillion (83%) as of 2021, leaving significant headroom for insurers to push term life, credit-protect, and return-of-premium plans. While ULIPs gained traction in FY25, their share is expected to moderate as equity markets turn volatile. Growth is increasingly shifting towards non-par savings and annuity products.
Annuities, which today form just 2–8% of insurers’ product mix, have grown at 21–53% CAGR between FY20–25. With India lacking formal social security, annuities are set to become an essential retirement planning tool. Regular-premium annuity plans, structured like SIPs, are gaining traction among customers in their 40s and 50s.
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Margins remain healthy, though recent regulations have weighed slightly. The GST exemption on premiums from September 2025 is positive for customers but will cut insurers’ input tax credit, impacting embedded value by 20–100 basis points in FY26. Similarly, new surrender value rules trimmed margins by 30–50 bps in FY25. “Insurers have historically innovated their way through such challenges, and GST exemption should eventually improve penetration and persistency,” PL Capital noted.
Stock Picks
The brokerage favours HDFC Life Insurance and Max Financial Services, both rated as long-term buys.
- HDFC Life (CMP: ~₹685): Expected to post 16% APE CAGR over FY25–28, aided by its strong partnership with HDFC Bank and deeper penetration in Tier-2 and Tier-3 markets. Trading at 2.4x FY27 P/EV, valuations remain reasonable given margin stability.
- Max Financial Services (CMP: ~₹960): With Axis Bank as a key banca partner and a growing share of non-par and protection products, Max Life is well placed to deliver steady growth. At 2.0x FY27 P/EV, the stock offers value with earnings visibility.
Other listed insurers such as ICICI Prudential Life (APE CAGR 11%, focus on non-par and protection) and SBI Life (steady growth but heavier ULIP mix) are also part of the broader opportunity set.
“HDFC Life and Max Financial Services stand out with superior growth visibility, stronger distribution, and more diversified product mix. These names are best placed to compound value over the next decade,” the report concluded.
Investor Takeaway
The Indian life insurance market is shaping up as a structural growth story. With penetration still low, annuities expanding rapidly, and protection products gaining traction, the sector offers steady double-digit growth potential.
For investors, PL Capital suggests focusing on HDFC Life and Max Financial Services, given their stronger distribution, innovative product portfolios, and visibility on long-term compounding.
For deeper insights, sector analysis, and detailed financial outlooks, explore PL Capital’s full research coverage.
To read the complete report, click here.
PL Capital
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.
