Indian Life Insurers: Selling More But Creating Less

The Indian life insurance industry is undergoing a product-mix reset after three years of prioritizing premium growth through ULIPs. Following the FY23 peak in Value of New Business (VNB) margins, insurers increasingly shifted toward ULIPs, aided by favorable tax treatment and regulatory changes, resulting in sustained margin compression despite healthy Annual Premium Equivalent (APE) growth. With ULIPs carrying lower VNB margins compared with non-participating and protection products, insurers have effectively sold more while creating less economic value from new business. However, management commentary across major private insurers suggests FY27E could mark a strategic pivot back toward non-par savings and protection products as companies prioritize VNB growth alongside premium growth. Stable interest rates improve the attractiveness of guaranteed-return products for customers, while the superior profitability of non-par products provides a strong economic incentive for insurers. The emerging shift from volume-led growth to value-led growth is likely to support margin recovery across the sector, favoring insurers with strong distribution franchises, execution capability, and a proven ability to rebalance product mix.