After pushing over 50 million lives out of coverage in the previous fiscal, group insurance is heading towards another year of contraction. Top private life insurers continue to report a sharp decline in lives covered as slower microfinance disbursals hit group credit life policies.
According to latest public disclosures, the number of lives covered by the top four private life insurers fell 36% year-on-year to 49 million in the first half of FY26. This decline comes on top of a 28% fall in the previous year, when lives covered dropped by a record 50 million to 128 million. The contraction in coverage in group business is closely linked to a slump in underlying loan disbursals, particularly in microfinance, where life cover is typically bundled with loans.
Why Loans Drive Insurance
Sarvesh Kumar Mishra, chief third party distribution officer at Generali Central Life Insurance, said while the broader group business of life insurers has not been fully impacted, the microfinance-linked segment — largely credit life policies — has seen a slowdown.
“Technically, it is a risky place to be. Claims are small and premiums are small, so the proposition does not suit insurers in the current situation. Once the sector is more regularised, it will make more sense for insurers to participate,” Mishra said. “My outlook is that this will remain the case for some time as there is significant volatility in the segment, and I do not see a near-term improvement.”
The decline in group insurance coverage comes at a time when the microfinance industry continues to face headwinds, despite some improvement in loan slippages. According to the Microfinance Institutions Network (MFIN), the industry’s self-regulatory body, over five million micro-borrowers have been pushed out of formal finance as a prolonged funding squeeze in the sector led to a sixth consecutive quarterly contraction in the microfinance portfolio in September 2025.
The sector’s overall portfolio declined 16.8% year-on-year to ₹3.40 lakh crore as of September 2025, from ₹4.08 lakh crore a year earlier. The number of loan accounts fell to 11.7 crore from 14.6 crore in September 2024, as lenders imposed several guardrails, including limits on the number of lenders per borrower and caps on exposure to prevent overleveraging.
Tightened Lending
Among top private insurers, ICICI Prudential Life reported the steepest decline in the number of lives covered under its group business. The insurer’s lives covered fell 60% to 9 million in the first half of FY26 from 22 million a year earlier. “The credit life business growth has been impacted primarily due to the slowdown in the MFI industry. With reforms being undertaken to spur business growth, we expect credit life business to gradually recover,” Dhiren Salian, CFO of ICICI Prudential Life Insurance, said during the company’s second-quarter earnings call.
HDFC Life saw the number of lives covered under group insurance decline 13% to 22 million in the first half, while Bajaj Life covered 7 million lives compared with 8 million in the same period last year. SBI Life Insurance, the country’s largest private life insurer, bucked the trend, reporting a 9% increase in group insurance covers to 11 million in the first half of the current fiscal.