Indian insurance sector remains heavily dependent on intermediaries, raising concerns over profitability: Report
New Delhi, May 21
India's general insurance market continues to remain heavily dependent on intermediaries for customer acquisition and policy sales, leading to high distribution costs and concerns around long-term profitability, according to a report by Praxis Global Alliance.
The report noted that nearly 80 per cent of new business in the Indian general insurance industry comes through intermediaries such as brokers, agents and corporate agents.
It stated that while this model has helped insurers rapidly expand their reach, it has also resulted in high customer acquisition costs, low customer ownership and weaker retention levels in key retail products.
The report said, "Indian market is its heavy dependence on intermediaries, which account for approx 80 per cent of new business."
The report further highlighted that around 83 per cent of consumers believe insurance products are complex, making them dependent on agents and advisors while purchasing policies.
Many customers are unable to clearly understand the differences between plans, resulting in heavy reliance on intermediaries for policy selection and guidance.
According to the report, nearly two-thirds of customers cited "assistance in policy selection" as one of the top reasons for choosing agents or advisors while purchasing insurance.
Customers also rely on intermediaries for trust, service support and convenience during the buying process as well as claims handling.
The report stated that the Indian general insurance market has grown steadily over the years, with Gross Written Premium reaching around Rs 3.1 lakh crore in FY25, growing at an annual rate of 11.5 per cent across motor, health and commercial insurance segments.
Despite this growth, insurance penetration in India remains close to 1 per cent of GDP, significantly below global levels, indicating substantial room for expansion.
However, the report pointed out that this scale growth has not translated into proportional profitability improvements for insurers. Combined operating ratios have largely remained in the 105-115 per cent range, indicating persistent underwriting losses across the sector.
Most insurers continue to depend heavily on investment income to offset losses from core insurance operations.
The report said that, unlike global insurers, which generate profits through underwriting performance, Indian insurers remain structurally dependent on investment income.
It noted that investment income accounts for nearly 21 per cent of Net Written Premium, while underwriting losses remain around 13 per cent.
The report also observed that customer ownership largely remains with intermediaries rather than insurers themselves. Around 40-50 per cent of customers continue to purchase multiple financial products through the same agent, strengthening intermediary relationships and reducing insurers' direct engagement with customers.
The report also highlighted high customer churn in the Indian insurance market. It noted that customers frequently switch insurers during policy renewals, particularly in motor insurance, where 36 per cent of surveyed respondents said they had changed providers at renewal.
This has led to what the report described as "reacquisition-led growth," where insurers spend heavily to acquire customers already insured by competitors.
The report suggested that stronger direct-to-customer (D2C) engagement could help insurers improve retention, lower acquisition costs and strengthen profitability over the long term.
It stated, "D2C customer relationships are delivering higher insurer NPS Scaling direct channels could help turn the tide in insurer's favor"
It added that global insurers with stronger D2C models have demonstrated better underwriting performance and lower combined ratios compared to intermediary-led models.
— ANI
Reader Comments
As someone who worked in insurance for 3 years, this report is spot on. The churn rate in motor insurance is insane—everyone switches for a 200-rupee discount, and then the insurers spend more to win them back. Meanwhile, agents own the customer relationship completely. The only way out is better digital products that are simple enough for customers to understand without hand-holding. 😊
The problem is deeper than just intermediaries. Indian insurance policies are written in such complex language that even I, a graduate, struggle to compare plans. Add to that the jargon-laced terms and conditions—no wonder people run to agents for help. If insurers really want to go D2C, they need to simplify products first. Make it like buying a phone plan, not solving a puzzle.
While D2C sounds great on paper, it won't work for everyone. In rural India, where I’m from, the agent is the only person who explains everything in the local language. My parents don't trust websites or chatbots. Until digital literacy improves and internet reaches every village, intermediaries are essential. The report should acknowledge this ground reality instead of just chasing global benchmarks.
Interesting read. In mature markets like the US and UK, D2C insurance thrives because products are standardized and digital trust is high. India seems caught in a middle ground—growing but still reliant on old models. The 105-115% combined ratio is brutal. Without fixing distribution costs, profitability will remain elusive. Good to see the report pushing for change, though the path is long.
R We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.