43% of life and health premiums now come from rural-majority regions; smaller cities drive half of demand

India’s insurance demand is increasingly shifting beyond metros, with rural and semi-urban regions emerging as key growth drivers, according to a study by Policybazaar based on premium data from FY23 to FY25. 

The report shows that 43% of fresh life and health insurance premiums in FY25 originated from rural-majority districts, defined as those where over half the population resides in rural areas, up from 41% in FY23. 

Within this segment, deeply rural districts (with over 70% rural population) consistently contributed 23–24% while districts with 50–70% rural population saw their share rise from 18% to 19%, indicating growing traction in peri-urban and semi-rural areas. 

The shift is also visible when mapped by city size. Cities with populations below 10 lakh accounted for 47% of life and health premiums in FY25, up from 44% in FY23. Notably, the 1–5 lakh population segment saw its share increase from 26% to 29%, reflecting rising adoption in emerging Tier-2 and smaller towns.

Motor insurance 

Motor insurance trends mirror this pattern. Rural-majority districts contributed a steady 36% of fresh motor premiums across FY23 to FY25, indicating sustained demand rather than a one-off spike. Within rural markets, districts with 50–70% rural population accounted for a larger share (21%) compared to deeply rural regions (15%), suggesting higher demand in areas on the cusp of urbanisation. 

Cities with populations below 10 lakh contributed 44–47% of motor insurance premiums over the three-year period, with even towns under 1 lakh population accounting for 8%—higher than their share in Life and Health insurance. 

India’s insurance landscape

The findings point to a structural shift in India’s insurance landscape, with digital distribution channels playing a key role in expanding access beyond traditional urban centres. Growth in smaller cities and towns indicates rising financial awareness, improved smartphone penetration, and increasing comfort with digital platforms. 

“Bharat is leading India’s insurance growth, both in scale and in behaviour. Nearly half of our Life and Health premiums today come from rural-majority and semi-urban India,” said Sarbvir Singh, Joint Group CEO of PB Fintech. 

He added that cities with populations under 10 lakh now account for nearly half of total demand, reflecting growing financial awareness and intent to access protection products beyond metros. 

The report underscores that the next phase of insurance growth in India is likely to be driven by Tier-2 and Tier-3 cities, district towns, and peri-urban clusters, as the gap between urban and rural insurance penetration continues to narrow.