Longer lifespans and rising healthcare costs are turning India’s silver economy into a gold mine for life and health insurers. With the elderly population projected to reach 350 million by 2050, insurers are seeing an opportunity to roll out longevity-linked savings plans and customised health products to tap the fast-growing demographic.

According to the UN Population Fund, people aged 60 and above will account for nearly 20% of India’s population by mid-century, up from just over 10% today. Worryingly, a Niti Aayog report estimates that 78% of them will be without any form of pension, making them financially vulnerable in retirement.

“Unlike many advanced economies where retirees benefit from social security, most Indians have limited financial support in their later years—with provident fund often being the only structured fallback,” says Tarun Chugh, MD & CEO, Bajaj Allianz Life. “This is where life insurance plays a crucial role with retirement and annuity products.”

As life expectancy rises, the risk of outliving savings becomes real. “Through deferred annuity plans, individuals can build a disciplined retirement corpus during their working years. And with immediate annuities, they can secure a guaranteed lifelong income that doesn’t outlive them,” Chugh adds.

Despite their relevance, annuities remain a small part of the market—accounting for just 4% of the life insurance industry’s `8.29-lakh crore premium in FY24. Pension plans made up 15.4%, while nearly 80% came from unit-linked, term, protection, and savings products.

One major hurdle is taxation. “People contribute to annuities from their post-tax income, and the annuity payouts—typically received in retirement—are again taxed as regular income for tax purpose,” says Vikas Gupta, chief product officer at ICICI Prudential Life Insurance. “That creates discomfort, as it feels like double taxation.” A more favourable tax treatment, Gupta believes, could significantly boost adoption.

Awareness is another challenge

Anuj Mathur, MD & CEO, Canara HSBC Life Insurance, says: “Annuities are sometimes viewed as inflexible or restrictive in terms of access to funds. Product innovations such as partial withdrawal features, joint life annuities and surrender options with minimal impact can help address these concerns.”

He also points to practical issues like low awareness and product familiarity, servicing challenges like physical submission of life certificates, and liquidity constraints hold back wider adoption.

Even large private insurers such as ICICI Prudential Life and HDFC Life see annuities forming just 5% of their product mix.

India’s Rs 1.2-lakh-crore health insurance sector is also targeting the elderly, especially as growth from younger demographics has slowed since the Covid-led boom. Senior citizens currently hold just 18% of all health insurance policies sold.

“Senior citizens use emergency services 3-4 times more than younger groups and face complex needs involving chronic care, preventive interventions, and long-term treatment,” says Amit Ganorkar, MD & CEO, TATA AIG General Insurance. “Given the rising incidence of age-related illnesses and increasing life expectancy, senior citizens are a highly sensitive segment requiring more than standard health insurance products.”

According to Ganorkar, most health policies focus on hospitalisation, but there’s a growing need to cover the full spectrum of care including post-hospitalisation care—rehabilitation, home nursing, assisted living– and long-term support. 

“With around 75% of seniors living with at least one chronic condition, chronic disease management must become a core benefit,” he says. 

Only 10% of India’s population is covered under retail health insurance. The rest are split equally between government schemes such as Ayushman Bharat (45%) and group health plans (45%), which typically end after retirement.

“Employer group policy coverage ends post-retirement, and most seniors are left without any protection unless they proactively buy individual plans,” says Amitabh Jain, COO, Star Health and Allied Insurance. More than 20% of Star Health’s customers are senior citizens.

Healthcare cost

With healthcare inflation running at 12-15% a year and lifestyle-related hospitalisation costing between Rs 1.5 lakh and Rs 5 lakh per episode, even middle-class retirees face financial pressure. Jain sees scope for tailored plans aimed at seniors in urban and semi-urban areas—especially those living alone or with caregivers.

“This opens space for insurers to introduce products that combine medical assistance with logistical support, such as coverage for emergency transportation, home-based nursing and palliative care, telemedicine, and home health care,” he adds.

To address affordability, the Insurance Regulatory and Development Authority of India (IRDAI) has capped annual premium hikes on senior citizen policies at 10%.

Ganorkar suggests the industry also look at creative pricing models to ease the burden. “Family floater policies that include parents or premium structures aligned with pension disbursements can make products more accessible,” he says.