The sharp rise in insurance commissions highlights the structurally high-cost nature of the insurance industry, with growth still heavily reliant on expensive intermediary-driven distribution than cost-saving digital transformation, Ajay Seth, Chairman of the Insurance Regulatory and Development Authority of India (Irdai), said.
The remarks were made during the 133rd Authority meeting of Irdai held in December 2025, the minutes of which were released on Thursday.
Seth noted that high front-loaded acquisition costs erode policyholder value in long-term products, resulting in low asset build-up in the initial years and minimal surrender value in case of early exits. This cost structure, he said, undermines trust and policy persistency. “As early exits effectively wipe out the policyholder’s principal while weakening the sector’s overall value proposition,” he said.
He also said the non-life insurance industry continues to face weak core profitability, with persistent underwriting losses across segments, particularly among public sector insurers. “Investment income remains the key stabilizer, offsetting underwriting losses, but creates vulnerability to market and interest-rate cycles,” he noted.
The insurance industry collected ₹8.02 lakh crore in premiums as of November 2025, marking a 9.86% growth. Life insurance continued to dominate the market, accounting for nearly 80% of total premium income, with total premiums reaching ₹5.80 lakh crore. General insurers collected gross direct premiums of ₹2.22 lakh crore, with health insurance emerging as the largest segment at 41%, overtaking motor insurance.
The Irdai Chairman also flagged rising dependence on cross-border reinsurance. “The rising dependence on cross-border reinsurance indicates capacity constraints in the domestic market and increases exposure to global pricing cycles. Growing outward premium flows also imply foreign exchange outgo, highlighting the need to strengthen domestic reinsurance capacity,” he said.
The industry’s assets under management (AUM) stood at about ₹78.48 lakh crore as of September 30, 2025. Investments remained largely conservative, with around 59% invested in government securities and about 30% in approved investments, ensuring stability and liquidity.
Seth further highlighted that rising surrenders in the life insurance sector pose risks to asset-liability management, as premature exits can force early liquidation of assets, reduce long-term investible funds, and signal policyholder dissatisfaction or competitive pressure from alternative financial products. In non-life insurance, he said the persistent rise in complaints points to systemic service issues.
The meeting minutes also revealed that eight applications for insurance registration are pending at the R1 stage and one at the R2 stage under the regulator’s three-stage approval process.
“Six out of eight applications in the R1 stage have been received in the last two to four months and are under examination. There are two applications at R1 stage that are more than a year old. Owing to certain regulatory concerns, these applications are under thorough examination,” Seth said. Irdai also said one applicant has obtained a no-objection certificate (NOC) from the regulator to begin the process of registering as an insurer.