Life insurers may see muted NBP growth, non-life and reinsurers to ride on health, motor premium during Q1FY26

Mumbai, July 7, 2025 — India’s insurance sector is poised for a mixed performance in the first quarter of FY26, with life insurers likely to witness subdued new business premium (NBP) growth, while non-life insurers and reinsurance providers are expected to benefit from buoyant trends in health and motor segments, according to analysts tracking the industry.

Despite macroeconomic stability and improving financial awareness, the life insurance industry continues to grapple with structural headwinds, while general insurance players are poised to capitalize on cyclical tailwinds and regulatory tailwinds.

Life Insurance: Sluggish Start to FY26

New business premium (NBP) growth for life insurers is anticipated to remain muted in Q1FY26, weighed down by continued moderation in demand for high-ticket non-participating (non-par) savings and unit-linked insurance plans (ULIPs). A high base in Q1FY25 and subdued retail investor sentiment in the early part of the quarter may also contribute to the slow momentum.

“NBP growth could be in the low single digits or even flat for the top-tier players like LIC and SBI Life,” said Aniket Bansal, Senior Analyst at Nirmal Insurance Research. “The transition away from large single premium products continues to impact topline metrics, although individual protection and annuity segments have shown resilience.”

The individual NBP of private life insurers is projected to have grown at a modest 4-6% YoY during Q1FY26, while LIC may see a marginal contraction due to its reliance on group single premium products, which are seeing waning demand amid regulatory tightening and changing tax norms.

ULIPs and Non-Par Products: Declining Share

The proportion of ULIPs and non-par guaranteed return products in the product mix has been shrinking over the past few quarters. ULIPs, which were once a key growth driver, have faced competition from direct mutual fund investments and sovereign schemes, while non-par savings products have lost appeal due to changes in tax treatment above ₹5 lakh premium.

“Investors are more return-conscious today and are steering toward pure-play investment products,” said Megha Desai, Head of Product Strategy at FinEdge Life. “That shift is hurting ULIP volumes, and with non-par products now taxed at maturity in many cases, the traditional life insurance value proposition is under pressure.”

This drag has been particularly pronounced for companies with a higher mix of non-par and ULIP-linked portfolios, such as HDFC Life and Max Life.

Non-Life Insurers: Robust Momentum from Motor and Health

In contrast, non-life insurers are expected to report strong double-digit growth in gross written premiums (GWP) for Q1FY26, led by health and motor segments. The general insurance industry has seen early benefits from continued demand for personal health covers, improved claim ratios, and stronger renewals in the group health segment.

The motor insurance space has also rebounded as vehicle sales remained healthy during April–June. Insurers like ICICI Lombard, New India Assurance, and Bajaj Allianz General are anticipated to post 13–16% YoY growth in premiums.

“Motor insurance is finally back to pre-COVID levels in both own damage and third-party segments, aided by new vehicle sales and better compliance,” noted Ravi Teja, Vice President, Insurance Research at Equirus Capital.

Health insurance continues to remain the strongest pillar of growth, with an increasing share of premiums driven by individual retail policies, especially in tier-2 and tier-3 cities. Premiums from the retail health segment are estimated to have risen 18–20% YoY.

Reinsurers in Favor as Loss Ratios Normalize

Reinsurers like GIC Re are also likely to benefit from improving pricing power, stabilization in combined ratios, and lower catastrophe-related losses in Q1FY26. Analysts expect underwriting performance to show signs of recovery, supported by lower provisioning and rate hardening in the commercial and health reinsurance segments.

“After facing years of suppressed margins, reinsurers are finally seeing rational pricing return, particularly in the health and property catastrophe segments,” said Deepali Kulkarni, insurance sector analyst at JM Financial.

GIC Re, which holds a dominant position in India’s reinsurance landscape, is anticipated to post moderate premium growth of 6–8% with better underwriting margins in the quarter.

Sectoral Outlook: Diverging Trends in H1FY26

While the life insurance industry faces short-term challenges, long-term fundamentals remain intact. Experts anticipate that revival in demand could emerge in H2FY26 with the festival season and improving disposable income trends.

Non-life insurers, however, are expected to retain momentum throughout FY26, with further gains possible from regulatory reforms, expanding product penetration, and tech-led distribution.

“Investors may prefer general insurers over life insurers in the near term,” said Arun Mathur, Portfolio Manager at Prithvi Investment Advisors. “Profitability in the health and motor segments, along with cost efficiencies, is positioning general insurers as more attractive plays.”

Investor Outlook

From an equity market perspective, analysts remain selective. While valuations for some life insurers have corrected to reasonable levels, concerns around premium growth and product mix continue to weigh on near-term upside.

On the other hand, companies like ICICI Lombard, Star Health, and GIC Re are likely to benefit from both volume and margin tailwinds. With improving combined ratios and steady ROEs, these stocks could see stronger institutional interest in FY26.

“Capital-efficient models, improving loss ratios, and regulatory clarity make general insurance and reinsurance a relatively safer bet in a volatile macro environment,” said Neel Shah, Head of Insurance & BFSI Equities at Prabhudas Lilladher.

Q1FY26 is shaping up as a quarter of divergence for India’s insurance sector. While life insurers may continue to struggle with muted NBP and a shifting product landscape, non-life and reinsurance players are poised to deliver solid results, leveraging demand for health and motor products. Investors and policymakers alike will be closely watching how insurers adapt to evolving customer preferences, macroeconomic trends, and regulatory changes in the quarters ahead.