Between fiscal years 2022 and 2025, new business premium at India's private life insurers grew at a compound annual rate of about 14 percent. Over the same three years, their total operating expenses grew at about 20 percent a year. That six-point gap is the most useful number in the McKinsey report published on September 23 under the title India's new insurance track: The marathon becomes an AI-led decathlon, and it is the number the current distribution debate has been circling without naming. The same report records that the number of in-force individual life insurance policies in India has been essentially flat at around 330 million between fiscal 2017 and fiscal 2025. The industry has added volume in rupees and nothing at all in policies, while the cost of running itself has outrun the premium it collects.
Context: what the report actually measured
The report is built on the IRDAI Handbook on Indian Insurance Statistics 2024-25, published in December 2025, plus insurer annual reports and corporate filings. On the life side, it finds the top four private life insurers grew new business premium at a compound annual rate of roughly 12 to 16 percent and embedded value at 14 to 20 percent between fiscal 2022 and fiscal 2026, while value-of-new-business margins fell by three to four percentage points, with one player excepted. Premium growth has outpaced policy volumes, market-linked products have taken share, and private insurers remain under pressure on distribution productivity and profitability. Zeroing in on sales and distribution specifically, the report isolates the figure quoted above: new business premium up at about 14 percent a year over fiscal 2022 to 2025, total operating expenses up at about 20 percent a year over the same period. Productivity among the leading life insurers has been essentially flat.
General insurance followed a different trajectory. Sector premiums grew at around 12 percent a year between fiscal 2022 and 2025, driven by higher policy volumes rather than by price. Productivity across the top five private multiline general insurers declined by 2.5 percent a year over fiscal 2022 to 2026, measured as premium per unit of employee expense. The report names the structural causes as low frontline productivity, manual underwriting processes and fragmented data, and identifies claims management as having emerged as a key differentiator of profitability. It also records the divergence that undercuts most of the sector's own narrative: adult bank account ownership rose from 53 percent in 2014 to 89 percent in 2025, and demat accounts grew nearly eightfold from around 28 million in fiscal 2017 to about 225 million in fiscal 2026, while insurance policy counts stayed flat. On McKinsey's reading, India's insurance industry remains the only major financial services sector, among banking, asset management and insurance, that has not fully benefited from the country's broader financial inclusion story.
Implication: what this changes about how to read the commission caps
- The caps are aimed at the right line, but the coverage argues about the wrong one. Expenses of management is not a commission line. It is the whole operating cost base of an insurer, commission and non-commission alike. A consultation that has spent six weeks arguing about whether distributors will survive is defending a component of a number that grew at 20 percent a year against premium that grew at 14 percent. The non-commission remainder is the larger part of the gap and it is the part no distributor decision controls.
- Flat policy counts mean the growth has been price and mix, not coverage. Premium rose roughly 14 percent a year while the number of in-force individual policies did not move at all across eight years. Whatever the industry sold, it sold more of it per customer at a higher value, to the same customers. That reframes what distribution reform is for. A framework that lowers acquisition cost does not by itself add a policy to any household that did not buy one in the first place.
- Embedded value growth and falling new business margin are the same fact seen twice. Value of new business margins down three to four percentage points while embedded value grew 14 to 20 percent means the industry is building the back book by writing thinner new business. That is a deliberate and defensible strategy, and it is also the strategy that makes a hard expense ceiling arrive at the worst possible moment: the growth in embedded value in any given year depends on new business the company no longer has the margin to write cheaply.
- The general insurance productivity decline is a warning about the 30 to 20 percent glide path. Premium grew at about 12 percent a year in general insurance and productivity per unit of employee expense fell 2.5 percent a year. Cost per premium is therefore rising faster than premium in that segment already. The proposed cut from 30 percent to 20 percent lands on the segment where the underlying trend is worst, which is an argument for the caps but also an argument for watching whether insurers respond with underwriting discipline or with premium shrinkage in the least profitable lines.
- The financial inclusion comparison is the uncomfortable one. Banking reached 89 percent account ownership because a bank account is used weekly and costs the customer nothing to hold. Insurance is a product the customer pays for today and may need once. McKinsey's framing is that insurance has not ridden the inclusion wave that banking and asset management have ridden. Any coverage objective in the distribution paper has to be solved against that structural fact, and no commission cap does anything about it.
- Claims management is the one thing the report singles out as a differentiator, and it sits oddly beside a cost squeeze. If claims handling is where general insurance profitability is actually decided, then an expense ceiling that compresses the whole cost base will be tested hardest exactly where the sector says it earns its money. That is the tension to watch in the drafting.
Action
Nothing in this report changes a premium you are quoted, and it should not be read as an argument for or against the caps. It is an argument about which number to hold the industry to. Three practical consequences.
For a policyholder, the flat policy count is the figure with the most information in it. It is the strongest available evidence that Indian insurance pricing has not been transparently improving for the median household, because if competition were deepening, the count of policies would be rising along with the premium. The question worth asking a seller is not what discount you can get but how many customers you are actually being compared against, because a discount is set by competition and the report says the competitive field has not widened.
For anyone renewing rather than buying fresh, the part of the paper that matters is the shift of remuneration toward renewals. The single best indicator that it worked is whether the person who sold you the policy in year one is the same person who handles the renewal. Renewal-weighted pay is designed to make that true, and it costs the insurer more in year one to achieve it.
For the industry, the number that matters in the final regulations is the split of the expense ceiling between commission and everything else. A ceiling applied to a line that grew at 20 percent a year against premium at 14 percent is a different instrument from one applied to commission alone, and the reporting that would let an outside analyst verify compliance is not currently required.
Watch item: the consultation closes on October 25, and the chairman has said he is meeting insurance chief executives in Delhi on October 5. The two things to watch in the draft regulations are whether the expense base is reported split, and whether claims turnaround times survive as a protected obligation when the cost base is compressed. The flat 330 million is the number to check again in the next IRDAI handbook.