India's insurance sector is witnessing a turning point as private funding in insurtech space is expected to reach $1 billion in the next 12 months, according to report released by digital transformation advisory firm The Digital Fifth in collaboration with Perfios, a B2B SaaS TechFin. However, in 2024, the funding stood moderated to $239 million from $497 million a year ago.
In 2021, insurtech funding reached its peak at $820 million due to aggressive expansion and strong investor enthusiasm. "This is because the sector transitioned to a quality-focused growth and as global economic factors encouraged more disciplined capital allocation," the report read.
“There is currently a clear gap in funding for tech stack companies and claims solutions — areas that are essential for driving efficiency and enhancing customer experience, and which should see significant growth in the coming years,” it added. It even revealed that total insurance premiums have surpassed ₹11.19 trillion in FY24.
The report further highlighted that insurance penetration dropped to 3.7% in FY24, with life insurance at just 2.7% - well below the global average of 7%. This singals an enormous protection gap, especially in health, life, and micro-insurance categories.
Initiatives like NHCX (National Health Claims Exchange) and the upcoming Bima Sugam platform, the Government and IRDAI are laying robust digital rails for insurance innovation.
A recent survey had revealed that more than 80% of insured persons polled feel unsure about the efficacy of their health insurance cover due to rising hospitalisation and medical costs in India. “Nine out of ten health insurance policyholders feel that recharge of sum insured is a key benefit".
This growing concern highlights the need for comprehensive healthcare solutions. The survey was conducted among 800 insured individuals aged 25-plus. It claimed that India had one of the highest medical inflation rates among other Asian countries in 2021 - approximately 14% higher than China, Indonesia and Vietnam.
