India’s life insurance sector is expected to maintain healthy growth over the next three years, supported by rising demand for protection products, stronger traction in annuity and non-participating savings policies, and improving profitability, according to a research report by Centrum Broking.The brokerage expects private life insurers to record an annualised premium equivalent (APE) compound annual growth rate (CAGR) of 13-18% between FY26 and FY29, reflecting continued demand for insurance products and a gradual improvement in business mix.“We continue to remain optimistic on life insurance industry with a healthy Q2,” the report said, identifying a shift towards more profitable products and expanding value of new business (VNB) margins as key factors supporting the outlook.

Protection and annuity products drive growth

During the second quarter of FY27, APE growth among insurers ranged from 7% to 16%, while gross premium growth for private insurers stood at 8-16% year-on-year, according to the report.New business premium growth also remained encouraging, with insurers reporting increased traction in both individual and group insurance segments.One of the key trends highlighted by the brokerage was the industry’s shift towards protection, non-participating savings and annuity products. Insurers have been reducing their dependence on unit-linked insurance plans (ULIPs), which are exposed to market fluctuations, while focusing on products that offer more stable margins and profitability.“Overall, annuity is emerging as a key growth driver, supported by demand for guaranteed returns and retirement solutions, while insurers increasingly shift towards protection and higher-margin products,” the report said.The changing product mix has also supported an improvement in VNB margins, which measure the profitability of new insurance business.During the first half of FY27, VNB margins expanded by 10-170 basis points year-on-year across private insurers. The report attributed the improvement to stronger protection business, a favourable product mix and operating leverage.Life Insurance Corporation of India (LIC) also recorded a 470-basis-point expansion in its VNB margin to 22.3%.

Higher expenses and mixed persistency trends remain concerns

Despite the growth in premiums and profitability, insurers continue to face operational challenges.Expense ratios increased across several private insurers in the second quarter of FY27, primarily because of higher operating costs. Persistency trends, which indicate the proportion of policies that remain active over time, were also mixed, with 13-month persistency declining across most insurers.On the regulatory front, insurers expressed confidence in their ability to comply with proposed norms. However, further clarity is expected after the final regulations are released.Centrum Broking said sustained growth in protection products and annuity offerings, along with expansion of distribution networks, would remain important drivers of the sector’s business growth and profitability over the coming years.