However, rising healthcare costs, increasing life expectancy, changing family structures and growing financial uncertainties are making formal insurance an increasingly important pillar of long-term financial security. As awareness of health, life and asset protection continues to grow, so does the need for comprehensive insurance coverage.

Yet, despite the growing importance of financial protection, insurance penetration in India remained at just 3.7%¹ of GDP in FY25, significantly below the global average of 7.3%. This highlights the sector's significant coverage gap, leaving large uninsured population still vulnerable to financial risks. 

India, over the last three decades, has progressively worked on taking insurance deeper and wider across the country. Foreign ownership was initially capped at 26% (in 2000), later increased to 49% (in 2015) and then 74% (in 2021). The latest reform allowing 100% FDI (in 2025), and reduction in entry capital for reinsurers from INR 50 bn to INR 10 bn now, removes one of the biggest barriers for international insurers looking to establish a stronger presence in India. It gives global companies greater flexibility to invest independently, bring in advanced underwriting expertise, deploy digital technologies and introduce specialised insurance products suited to India's evolving needs. 

Several leading international insurance groups already have a footprint in India through joint ventures or have reinsurance operations. European firms have traditionally dominated the reinsurance sector while insurers from Japan, the United States, Australia and Italy have partnered with Indian companies across life, health and general insurance businesses. 

With full foreign ownership now permitted, India is expected to witness greater participation from global insurers, either through expansion of existing operations or by entering the market independently. Increased competition is likely to benefit consumers through a wider range of products, enhanced digital experiences, faster claims processing and more tailored insurance solutions. At the same time, insurers are expected to deepen their use of artificial intelligence, data analytics and digital platforms to improve operational efficiency and expand their reach, particularly across underserved rural and semi-urban markets. 

For insurance companies, real estate has traditionally been more than just an investment avenue. It provides stable, long-term returns, helps diversify investment portfolios and serves as an effective hedge against inflation. Income-generating commercial assets, including office buildings and warehousing facilities, offer predictable cash flows that align well with insurers long-term liabilities while preserving asset value over time.

The liberalisation of FDI is also expected to create new demand for commercial real estate. As global insurers establish wholly-owned subsidiaries or expand their Indian operations, demand for Grade-A office space is likely to increase across major business centres such as Mumbai, Gurugram, Bengaluru and Hyderabad. Growth in insurance Global Capability Centres (GCCs), technology hubs and shared service operations is expected to further support office leasing activity. Backed by a large skilled workforce, competitive operating costs and a mature digital ecosystem, India continues to strengthen its position as a preferred destination for global insurance operations. 

In the longer term, better-capitalised insurers are also expected to play a larger role as institutional investors. Insurance companies typically seek stable, long-duration assets that generate predictable returns. As the sector matures, investments in REITs, infrastructure assets, logistics parks, data centres and commercial properties could increase, providing additional capital for India's real estate and infrastructure sectors. At the same time, rising insurance awareness could encourage greater adoption of property insurance, strengthening risk management across residential, commercial and industrial assets. This, in turn, can improve investor confidence and contribute to a more resilient real estate ecosystem. 

The success of this renewed policy position will depend on effective implementation and sustained regulatory oversight. Building consumer trust, improving financial literacy and expanding insurance access across rural India remain equally important priorities. Nevertheless, the liberalisation policy suggests India is committed to creating a globally competitive insurance market. It represents an opportunity to modernise the sector, improve financial protection for millions of Indians and strengthen the country's investment ecosystem. As global insurers increase their participation and domestic players adapt to a more competitive environment, India's insurance industry appears well positioned to become one of the world's most dynamic growth markets over the coming decade.

¹Swiss Re Sigma Report (No. 02/2025)