The Economic Survey frames insurance as a growth problem disguised as a coverage problem. To close India’s protection gap and deliver “Insurance for All by 2047,” it says the sector must outpace nominal GDP, not inch alongside it. The binding constraint is not demand but distribution.“The escalating cost of acquisition is not merely an operational friction, it acts as a structural constraint on the sector’s evolution, creating distortions that limit inclusion, erode consumer value, and threaten long-term stability.”Acquisition costs for insurance companies include commissions and fees that they pay to distributors for selling policies. According to industry persons, the incentives to bankers to sell insurance vis-a-vis bank deposits is one of the triggers for mis-selling of insurance.That cost drag has produced what the Survey calls a penetration–density paradox. Insurers extract more revenue from existing customers, yet fail to widen base. Penetration has slipped to 3.7%, even as density rose to $97 in FY25, a sign that overhead-heavy distribution is shrinking risk pool rather than broadening it. Acquisition costs are no longer an operational irritant but a structural brake on stability and consumer value.The proposed fix is a policy-led reset. Legislative changes under Sabka Bima, Sabki Suraksha Act, 2025, aim to pull in long-term capital.
