Mumbai, 18 Jan 2026, 16:44 IST
- IIM Kozhikode panel recommends breaking up LIC and privatizing three state-run general insurers, report reveals
- The roadmap aims for 60% coverage by 2030 among those willing and able to pay for insurance; the penetration target has been lifted to 4.5%
- LIC cautions that a split could prove “disastrous,” shaking the confidence of its nearly 270 million policyholders
An expert panel from the Indian Institute of Management Kozhikode has proposed splitting up Life Insurance Corporation of India (LIC) and fully divesting three state-run general insurers. The recommendations, outlined in a report submitted to industry bodies and the regulator, aim to help achieve the “Insurance for All by 2047” target. 1
The proposals come as India aims to expand insurance coverage before its 100th year of independence in 2047, with the industry increasingly relying on tech-driven distribution to connect with low-income and informal workers.
They also disrupt a market long controlled by the government-owned behemoth in life insurance, potentially triggering another wave of consolidation as private firms scramble for scale and capital.
The report noted that LIC’s hold on the market has loosened but is still substantial, pointing to a “prima facie case” for a breakup. It highlighted that LIC made up around 57% of life insurance premium collections in 2023-24 and controlled about 71.8% of assets under management.
The panel recommended the government bring in a merchant banker—essentially an investment banking adviser—to explore options for a demerger or other forms of unbundling aimed at boosting value and efficiency.
LIC pushed back in comments included in the report, warning that a split would be “disastrous” for the life insurance industry and could “shake the confidence” of citizens holding roughly 270 million policies, the report said.
LIC highlighted a steady drop in its market share following liberalisation, facing growing pressure from private players like SBI Life, HDFC Life, and ICICI Prudential Life.
On the non-life front, the report urged either recapitalising National Insurance, Oriental Insurance and United India Insurance in the Union Budget 2026-27 or moving toward full divestment, citing their negative solvency ratios.
A solvency ratio measures an insurer’s capital cushion against claims. In India, the regulator mandates insurers maintain it at 150%, or 1.5 times the required minimum, to manage risk exposure.
“Capital infusions or divestment” have the power to “jolt the industry,” triggering private investment and boosting insurance uptake—provided trust is established, said Mridul Saggar, head of IIM Kozhikode’s Centre for Macroeconomics, Banking & Finance, in the report.
The roadmap sets clear targets for 2026–2030: covering 60% of Indians who both want and can afford insurance. This includes at least one term life policy—a basic life cover for a fixed duration—and one health insurance product.
The report also projects insurance penetration—the ratio of premiums to gross domestic product—to climb to 4.5% by 2030, up from 3.7% in 2024.
The panel suggested offering low-cost basic products featuring daily or weekly micro-payments tailored for informal workers, leveraging the Unified Payments Interface, India’s real-time digital payments network.
The proposal also includes an “Insurance Inclusion Index” that merges access, usage, and quality metrics. It calls for a quicker move to risk-based capital rules, updates to Ind AS/IFRS 17 accounting standards for insurance contracts, and a more developed reinsurance market — where insurers buy insurance themselves — to strengthen coverage against catastrophes and climate risks.
Execution remains a major question mark. Both a LIC demerger and a PSU divestment would require backing from political leaders, regulatory green lights, and keen investor interest. The state insurer’s caution about trust underscores how a reform intended to expand coverage might swiftly rattle customers.
The report also proposed easing the strict division between life and non-life businesses and broadening licence categories. It predicted the insurer count could climb to roughly 120 over the next decade, while reinsurers might increase to about 11 from just two, driven by intensified competition and greater foreign involvement.
