Page 16 - The Insurance Times February 2026

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News

acquisition costs compress early policy
Paid-up capital of life insurers rises 7% in FY25 on
value, leading to weaker persistency
fresh infusions and higher surrender rates. This limits
The paid-up capital of India's life insurance sector increased 7.12 per cent to the ability of insurers to pass scale
Rs. 39,714 crore in FY25, supported by fresh capital infusions by insurers, efficiencies on to customers. The
according to data released by the Insurance Regulatory and Development central bank also observed that the
Authority of India. The net increase in paid-up capital during the year stood conservative investment approach
at Rs. 2,641 crore. adopted by insurers may have reduced

The expansion was driven primarily by an additional Rs. 1,600 crore infused the appeal of long-term insurance
into Tata AIA Life Insurance Company and Rs. 1,040 crore invested collectively savings products for consumers.
by 12 life insurers. During the year, one private insurer returned Rs. 70 crore The RBI cautioned that without
of capital, while five private life insurers raised Rs. 4,490 crore through other addressing cost structures, insurance
forms of capital. As of March 2025, total other forms of capital in the life penetration may remain constrained
insurance sector stood at Rs. 9,651 crore.
despite rising premium volumes.
Renewal premiums continued to dominate total premium income,
contributing 55 per cent in FY25. New business premium grew 5.12 per cent, Mis-selling grievances
compared with 8.08 per cent growth in renewal premium. The life insurance
industry reported profits of Rs. 56,006 crore, up 18.14 per cent year-on-year, against life insurers rise
with 18 of the 25 insurers posting profits during the year. 14% in FY25

Complaints related to mis-selling
High distribution costs recent years has been driven more by against life insurance companies
distribution-led strategies than by
continue to constrain improvements in operating efficiency. increased 14.3 per cent year-on-year
insurance penetration: As a result, growth has largely to 26,667 in FY25, according to the
annual report of the Insurance
reflected higher spending by existing
RBI policyholders rather than a broadening Regulatory and Development Authority
High distribution and acquisition costs of the insured base. In the non-life of India. The rise came even as overall
are limiting the expansion of insurance segment, commission expenses have grievances against life insurers declined
coverage in India by reducing risen significantly faster than other marginally to 120,429 during the year.
affordability and widening the gap operating costs, contributing to The regulator flagged mis-selling as a
between insurance density and persistent underwriting losses and persistent conduct risk in the life
penetration, the Reserve Bank of India greater reliance on investment income. insurance sector and expressed
said in its Financial Stability Report. concern over the continued rise in
In the life insurance sector, the RBI
The RBI noted that premium growth in highlighted that front-loaded complaints linked to unsuitable product

14 February 2026 The Insurance Times