National Startup Day 2025: Insurtech Startups Eye Growth Beyond Metros, Push for GST Relief India's insurance market is projected to reach USD 222 billion by 2026 and Robotic Process Automation (RPA), AI will play a pivotal role

Startups are a driving force behind economic growth, especially in developing countries like India. They are at the heart of India's transformation into the fourth-largest economy by 2025 and play a critical role in achieving the vision of 'Viksit Bharat' by 2047.

In recent years, the Indian startup ecosystem has witnessed a remarkable transformation, fueled by innovative ideas, government initiatives, urbanization, and increased technological penetration. This ecosystem holds special significance for National Startup Day 2025, as over 1.59 lakh startups have been recognized by the Department for Promotion of Industry and Internal Trade (DPIIT) as of January 15, 2025.

This milestone firmly positions India as the third-largest startup ecosystem globally. Additionally, between 2016 and October 31, 2024, startups have created approximately 16.6 lakh direct jobs, according to DPIIT data.

With rapid urbanization and growing capital flows from Tier II and Tier III regions, several industries have experienced substantial growth. Among them, the Insurtech sector stands out as one of the fastest-growing markets in the country. A report by the Boston Consulting Group in partnership with the India InsurTech Association highlights that the Indian insurtech market achieved a 12-fold revenue growth, reaching USD 750 million in 2023—largely driven by insurtech startups.

Untapped potential

Despite this growth, Anand Prabhudesai, Co-Founder of Turtlemint believes there is immense untapped potential in the sector. "With insurance penetration currently below 3 per cent of GDP—significantly lower than global benchmarks—there is immense room for expansion as the economy develops over the next 25 years. The insurance sector is estimated to grow 12 times to USD 1.4 trillion during this period. The sector's potential is evident, with USD 2.5 billion in funding mobilized to date," he remarks.

Layak Singh, Co-Founder of Artivatic.AI (the insurtech arm of RenewBuy), emphasizes the challenge of expanding insurance access to smaller cities and towns. "Most insurance companies continue to focus on the top-tier cities and struggle to expand due to high fixed costs. Even today, insurance remains highly under-penetrated in smaller towns, largely due to its complex product structures and a reliance on physical, branch-led distribution models," he explains.

Matilde Giglio, Co-founder of Even says, "Let us first admit that health-insurance is a complex product to comprehend. B2B insurance and Government schemes on basic insurance will play a large part in educating the masses on its importance and ease-of-use. From what we have learnt, though, more than 70 per cent of employees are unaware of healthcare benefits provided to them. As an industry, there's a lot more to be achieved in terms of the penetration of individual retail coverage," She stresses.

On the other hand, Animesh Das, MD and CEO of ACKO General Insurance echoed the same challenges but spot the light on opportunities the market holds. "India's insurtech sector is at an exciting inflection point, driven by rapid digital adoption, evolving customer expectations, and the increasing demand for affordable and personalized insurance solutions," he shares.

Tech over tradition: fruits and risks

Gone are the days when an insurance agent would visit your home with a bag full of documents, spending hours filling out forms.

Amit Boni, Founder and CEO of Ensuredit notes, "Consumers now expect instant policies, AI-driven claim processing, and personalized coverage. Insurtech enterprises are rising to the occasion by offering innovative, customer-centric solutions."

At the same time, the spokesperson emphasizes the risks associated with AI. "With the rise of AI, insurers are being forced to completely rethink cyber insurance. We believe it will evolve from simple dark web monitoring and identity theft reports to a far more complex, ever-changing environment. Measuring risk will become a highly advanced, technology-driven process that aligns with customer needs and market realities."

Layak Singh also highlights the transformative role of technology in reshaping the insurance industry. "AI-driven algorithms are enabling instant risk assessments, streamlining application processes, and improving accuracy—benefiting both insurers and applicants," he explains.

Singh further cautions traditional insurance companies about an impending shift in the industry, predicting what he calls an era of 'Digital Darwinism.' "Technological advancements will soon outpace organizational adaptability. To survive and thrive in this era, traditional insurers must embrace digital forces to expand their reach and reduce operational costs," he warns.

Additionally, Boni stresses, "partnerships between traditional insurers and tech-driven startups are accelerating digitization across the insurance value chain."

Additionally, he stresses that partnerships between traditional insurers and tech-driven startups are accelerating digitization across the insurance value chain.

Road for 'Insurance for All by 2047'

To penetrate beyond metro cities, experts have emphasized the need for tax relief from the government.

"Since we are nearing the Union Budget 2025, reconsidering the 18 per cent GST on health insurance policies and introducing tax relief measures for annuity and pension products could play a pivotal role in advancing financial inclusion and security," says Anand Prabhudesai, Co-Founder of Turtlemint.

Layak Singh shares a similar perspective, adding, "With the reduction of GST on health insurance premiums, there should also be a dedicated health regulator to effectively monitor rising medical costs. Additionally, there is a pressing need to promote affordable term insurance—a separate tax exemption for term insurance could encourage more people to secure themselves with adequate life coverage."

Giglio echoes these challenges but highlights another critical aspect: "Strengthening digital and health infrastructure in smaller cities is crucial. Partnerships with insurers and fintech platforms, along with a focus on underserved areas, will drive awareness and adoption."

Das believes that achieving the vision of 'Insurance for All' by 2047 requires more than just tax incentives. "Policy enhancements that encourage innovation, improve data-sharing frameworks, and enable deeper public-private partnerships will play a pivotal role," he concludes.