Following a whirlwind of transformative changes in 2025, India's insurance industry is now setting its sights on a period of stability and consolidation for the year ahead. The sector hopes to utilize 2026 to fully adapt to the sweeping policy reforms introduced recently and regain a steady growth trajectory.
A Year of Landmark Reforms
The past year was exceptionally eventful for insurers. The impact of the new policy surrender value norms from late 2024 began to be felt. This was swiftly followed by several landmark developments: the official rollout of the Bima Sugam insurance marketplace, regulatory approval for 100% foreign direct investment (FDI) in the sector, and a significant Goods and Services Tax (GST) exemption on retail term and health insurance premiums effective from 22 September 2025.
Narendra Bharindwal, President of the Insurance Brokers Association of India (IBAI), highlighted the positive environment. He stated that India enters 2026 with a powerful combination of structural advantages, modernized regulations, digital infrastructure, and a tax regime that is friendlier towards retail protection products. He anticipates momentum in both life and non-life insurance segments to accelerate from a softer base in the previous fiscal year.
Growth Drivers and Structural Changes
Industry leaders are optimistic about the long-term benefits of these reforms. Shruti Ladwa, Partner and Insurance Leader at EY India, explained that the 100% FDI provision will attract global capital, increase competition, and foster innovation in products and technology. She also pointed to relaxed merger norms as a potential catalyst for increased merger and acquisition activity in 2026.
Pankaj Gupta, MD & CEO of Pramerica Life Insurance, believes the steady expansion of India's middle class and a growing awareness of life's uncertainties will be fundamental growth drivers. He notes that life insurance is now firmly establishing itself as a core component of household financial planning in the country.
The GST Exemption: A Double-Edged Sword?
The GST exemption on retail term and health policies, while making premiums more affordable for customers, introduced complexity for insurers by removing their ability to claim input tax credit. Initial trends showed a spike in consumer interest, but some experts caution that this surge may be temporary.
Pallavi Malani, MD & Partner at BCG India, observed that search volumes for health insurance spiked in September and October 2025 but normalized later in the year. She views the GST change as a "structural change" with effects that will linger into the first half of 2026, expecting a more sustained impact over the longer term. Ladwa from EY agrees, calling lower premiums a "permanent positive driver" for insurance penetration, with the initial disruption easing as distributors adapt.
Bima Sugam: The Potential "UPI Moment" for Insurance
The pilot launch of the Bima Sugam marketplace in 2025 is set for broader implementation. The platform aims to standardize policy purchase, renewal, and claims processes. It will aggregate customer KYC and policy records under a single "Bima Pehchaan" identity, potentially lowering costs by reducing duplication.
Narendra Bharindwal of IBAI believes that for brokers, Bima Sugam will expand addressable demand and reduce post-sale friction. He boldly predicted that if execution goes as planned, Sugam could become the "UPI-moment" for insurance by late 2026.
Health Insurance to Lead Retail Growth
Industry consensus indicates that health insurance will be the primary engine for retail growth in 2026. While life insurance is also expected to grow, its start may be slower due to ongoing adjustments to taxation on Unit-Linked Insurance Plans (ULIPs) and the new surrender value norms.
Pallavi Malani expects the value of new business for life insurers to remain under pressure as they rebalance their product mix, with the impact potentially tapering by April 2026. In contrast, demand for health plans has reportedly grown by 35-40% since the GST cut, a trend experts like Rakesh Jain of IndusInd General Insurance expect to continue.
Commercial Lines Set for a Strong Year
2026 is also poised to be a significant year for commercial insurance. Growth is expected to be driven by India's strengthening capital expenditure cycle, infrastructure development, manufacturing expansion, and rising demand from sectors like renewables and data centers. Ladwa noted that lines such as fire, engineering, and liability insurance have already seen 6-20% year-to-date growth.
Shantanoo Saxena, Chief Broking Officer at Aon India, identified casualty/liability, cyber insurance, and directors and officers (D&O) covers as key growth segments. He mentioned that while pricing is generally flat in most lines, property insurance is an exception, witnessing double-digit increases due to changes in India's rating system.
Despite the optimistic outlook, challenges remain, particularly for standalone health insurers who must absorb the margin impact from GST changes, a situation expected to normalize by the end of June 2026. Overall, the Indian insurance sector stands at a pivotal point, looking to translate a year of profound reform into a decade of sustainable, inclusive growth.
