The government's latest economic survey for the fiscal year 2025-26 mentions that high distribution costs are limiting the growth of India's insurance sector.
The escalating cost of acquisition is not just operational friction for insurance but acts as a structural constraint on the sector’s evolution, creating distortions that limit inclusion, erode consumer value, and threaten long-term stability, the survey added.
It further said that the high-cost model poses a risk to the core financial strength of insurers, with escalating acquisition and administrative costs resulting in increased operating expenses across both life and non-life insurance.
The economic survey also highlighted a significant shift within the non-life segment, where health insurance has overtaken motor insurance to become the largest line of business. Health insurance now accounts for 41% of total non-life premiums, reflecting rising healthcare costs and growing awareness of financial protection against medical expenses. This shift has also contributed to a sharp rise in claims. Net incurred claims in the non-life segment have increased by over 70% since 2021.