💠 Life Insurance Growth: Is Income Tax Change Really the Culprit? 💠

 

There’s a growing belief that the recent slowdown in life insurance is largely because of changes in the income-tax regime and new regulatory guidelines.

But when we examine the actual numbers — especially for the Individual Non-Single Premium (INSP) segment, which should have been the most impacted — the story looks very different.

📊 What Does the Data Really Show?

IRDAI Data (31 March 2023 vs 31 March 2025)

▪️ First-Year Premium:

₹99,449 Cr → ₹1,15,237 Cr

(+15.9% growth)

▪️ Policies Sold:

2.71 Cr → 2.79 Cr

(Marginal growth, essentially flat)

▪️ Average Premium per Policy:

₹36,697 → ₹41,304

(+12.5% growth)

👉 This is important because Section 10(10D) changes (effective 1 April 2023) made maturity proceeds taxable when total annual premium exceeds ₹5 lakh.

Logically, Premiums  should have slowed down.

Yet, premium growth continues to be strong — only policy count has stagnated.

🔍 So what’s actually happening?

The data shows something counter-intuitive:

✔ Premiums are rising at a healthy pace

✘ Policy numbers are barely increasing

This suggests that:

▪️ We are selling higher-ticket policies rather than expanding the customer base.

▪️ Growth is coming from up-selling, not improving insurance penetration.

Average premium per policy is climbing because the mix is moving towards larger-value policies, not more families being insured.

The issue is not taxation or regulations — it’s the industry’s strategy.

🎯 The Real Issue: Strategy focused on

▪️ First-Year Premium (FYP) rather than number of sales

▪️ High-ticket traditional and non-par savings plans

▪️ Return-led positioning instead of protection-led advice

And when we look at performance insurer-by-insurer, the differences are striking:

📌 Some insurers are showing robust growth in both premium and policy count

📌 Others are facing stagnation or even degrowth on both fronts

If income-tax changes were the main driver, every insurer should have been impacted equally.

But they’re not.

This clearly indicates that differences in performance are driven by:

✔ Company strategy

✔ Product architecture

✔ Distribution approach

✔ Customer segmentation

✔ Ability to sell true protection vs investment-linked products

🧩 Food for Thought

▪️ Are we over-relying investment-led policies instead of expanding real protection coverage?

▪️ How are some insurers flourishing in the same tax and regulatory environment? What are they doing differently?

▪️ Is the real challenge the industry’s limited penetration, not the loss of tax arbitrage?

▪️ Do we need a fundamental shift from “returns-driven selling” to “needs-based protection”?

▪️ Are we chasing premium numbers while true insurance coverage remains stagnant?

The data tells its own story.

Let’s base the conversation on data.

🤝 I’d love to hear your views.

#ProtectionGap #InsuranceLeadership

#FinancialInclusion #AshwaniSpeak #AshwaniThink #LifeInsurance