Daybreak - 47 million in India lost life insurance in one year. Nobody blinked

Episode Date: July 9, 2025

47 million Indians just lost their life insurance coverage. But not one of the country’s biggest insurers seem bothered.In this episode, we look at the silent collapse of credit-linked life insurance—policies that were once bundled with microloans and quietly protected millions of low-income borrowers. But now, that model is breaking down.Blame mounting defaults, shaky microfinance lending, and a post-pandemic spike in death claims. As lenders pull back and insurers retreat, entire communities are being pushed out of the safety net—with barely a ripple in the headlines.Why the regulator won’t step in and what persistent high mortality means for the future of group insurance?Tune in.To apply to The Ken’s podcast team, click hereDaybreak is produced from the newsroom of The Ken, India’s first subscriber-only business news platform. Subscribe for more exclusive, deeply-reported, and analytical business stories.

Hi, this is Rohan Dharma Kumar. If you've heard any of the Ken's podcasts, you've probably heard me, my interruptions, my analogies, and my contrarian takes on most topics. And you might rightly be wondering why am I interrupting this episode too. It's for a special announcement. For the last few months, I and Sita Raman Ganeshan, my colleague and the Ken's deputy editor, have been working on an ambitious new podcast. It's called Intermission.

We want to tell the secret sauce stories of India's greatest companies. Stories of how they were born, how they fought to survive, how they build their organizations and culture, how they manage to innovate and thrive over decades, and most importantly, how they're poised today. To do that, Sita and I have been reading books, poring over reports, going through financial statements, digging up archives, and talking to dozens of people. And if that wasn't enough, we also decided to throw in video into the mix. Yes, you heard that right. Intermission has also had to find its footing in the world of multi-camera shoots in professional studios, laborious editing, and extensive post-production. Sita and I are still reeling from the intensity of our first studio recording.

Intermission launches on March 23rd. To get an alert as soon as we release our first episode, please follow Intermission on Spotify and Apple Podcasts or subscribe to the Ken's YouTube channel. You can find all of the links at the ken.com slash I am. With that, back to your episode. India's life insurers lost nearly a quarter of their customers this year. That is tens of millions of people, mostly low income, suddenly left unprotected. And here's the strange part.

Nobody seems to bother by it, not the big private insurers, not the banks, not even the regulators. You would be expecting sirens to be blaring about something like this. Instead, it's mostly silence. So what happened? Was it a fraud? Was it a market crash? Was it a sudden public health emergency? Not quite. The answer is more subtle and messier. What we are seeing is the quiet unraveling of a fragile ecosystem, microfinance and insurance. once hailed as a breakthrough for India's poor. And here's the thing. For years, a large part of India's life insurance coverage came bundled with microloans. Take a loan, get insured, simple.

But when those loans slow down, so does the insurance. Now, defaults are rising, lenders are backing off and insurers are walking away. And behind that number story is the story about bad lending, regulatory indifference, and even a lingering question about debt itself. Today, we are going to look at the collapse of credit-linked life insurance in India. Why the industry saw this coming, why nobody is fixing it, and why the most vulnerable are once again paying the price. If life insurance is supposed to be a safety net,

then how did 47 million people fall straight through in just one year? Welcome to Daybreak, a business podcast from the Ken. I'm your host, Nickda Sharma, I don't chase the news cycle. Instead, every day of the week, my colleague Rahal Philippos and I will come to you with one business story that is worth understanding and worth your time. Today is Thursday, the 10th of July. Let us start with the headline. In FY 2025, 47 million fewer people were covered by life insurance than the year before. And that is not a blip. It is one of the steepest drops that India has ever seen and yet no panic. Executives from India's

top private insurers, from HGFC life to ICICI credential and SBI life, were not surprised. One even called it expected and anticipated. But it shouldn't have been. Industry veterans say that this kind of collapse usually follows a major shock, like a pandemic. But this time, there was no external trigger. So where did this damage come from? The answer is microfinance, a sector that is quietly imploding. For years, microfinance institutions or MFIs have been aggressively lending to low-income borrowers,

and those loans often came bundled with group credit linked life insurance. It's a policy that kicks in if the borrower dies, meant to protect the family and the lender. But as default rise and lenders retreat, insurers are stepping back to. And the result is a mass loss of coverage. It's not just the numbers. In February 2025, a group of life insurance premiums dropped nearly 19% year-on-year, and that is after a nearly 80% surge the year before. Volatile? Definitely. Sustainable? Not really.

That volatility is baked into this model, because group insurance is tied directly to microlending. When loan volumes explode, so does insurance. And when they slow down, the coverage vanishes. And now it is vanishing. and at scale. A rule change in 2024 tried to separate insurance from aggressive lending. It made it harder to push both products together. At the same time, insurers are seeing more death claims. Mortality rates are now nearly 75% of pandemic peaks, even higher than during COVID's worse. Some blame poor policy, others point to post-vaccine mortality data. Researchers like the epidemiologist

Amita Banerji have flagged it. The Indian Council of Medical Research has dismissed it. But the elevated death claims are real and expensive. One expert summed it up to my colleague, the Ken reporter Sudeshina Ray, like this. The microfinance model is broken and nobody wants to fix it. Not the MFIs, not the insurers and not even the RBI. More on this in the next segment. Hi, this is Rahil, the co-host of Daybreak.

I'm quickly pausing this episode to share something very exciting with you. We are hiring. We are looking for someone in the early stages of their journalism career, maybe you're fresh out of journalism school, or you've done a couple internships and projects and are eager to take on your first full-time role in audio. I'm looking for a co-host to help launch a brand new podcast from the Ken. This is a full-time role,

and you'll get to work closely with me as well as the rest of the audio team, right from story pitches to interviews, to shaping how the final show sounds. If you're curious, ambitious and absolutely love audio storytelling, we would love to hear from you. All the details will be in the show notes of this episode. India loves to talk about financial inclusion. Over 550 million people have Jandhan accounts.

More than half are rural, most belong to women. It sounds like progress, and for a while it was. For many of these women, financial access meant three things. a bank account, a microloan, and life insurance all bundled together. It was neat, efficient, and gave the illusion of protection. But now that loop is breaking. Look at the data. The number of microfinance borrowers has not grown much, just 6.9% in seven years.

But the total loan book? That is up by 22%. Lenders are not finding new customers. they're just lending more to the same ones. And that means more debt, more risk and more defaults. And when defaults rise, credit-linked life insurance takes a hit. It is a domino effect. No new borrowers means no new loans.

No new loans means no bundled insurance. Plus, the quality of lending has slipped. During COVID, lenders dropped strict standards. They gave out loans freely sometimes to borrowers already juggling multiple debts. Many of those people now cannot repay. An MFI executive put it quite bluntly. They said you'd expect lenders to stop funding defaulters, but here they don't. One non-bank lender found 55,000 borrowers with loans from more than six lenders,

and that is the scale of loan stacking. Now, technically, self-regulatory norms exist. They cap borrowing at four lenders and two lakh rupees per borrower. But those caps are. ignored quite often. To understand this better, let us talk about why people borrow. Not to build businesses, but for consumer goods. You know, TVs, scooters, stuff that does not generate income. So borrowers take more loans just to pay off the old ones. The debt piles up and insurers, they walk away. Meanwhile, mortality claims stay high. Some scientists link this to

vaccine side effects. Some don't. But regardless, insurers are recalibrating. They are raising term-life premiums and reviewing risk models. And all of this is pushing insurers even further out of reach for people who need them the most. And what about the regulator? In June, the RBI finally spoke up. It warned of high interest rates, coercive recovery, and rising indebtedness to microfinance. But that was it. No real action, no structural reform. Critics say that the RBI's silence is not surprising. After all, these loans boost the numbers for flagship government programs like Mudra. The more MFIs lend, the better it looks for policy makers, even when it is toxic lending.

And the worst part, the traditional pressure mechanism, joint liability is broken. No more group repayment, no more pay of pressure and no incentive to repay. Add to that, political pushback on aggressive recovery. and lenders cannot collect anymore. So they stop lending. Then the insurance stops too. And the people, they just left hanging in just one year. Nearly 50 million lives quietly slipped out of India's insurance net.

Not because of a war, not because of a disease, but because of a model that stopped working and a system that let it break. Everybody saw it coming. Nobody stopped it. And as always, those who lose the most are the ones who had to. the least. Daybreak is produced from the newsroom of the Ken, India's first subscriber-focused business news platform.

What you're listening to is just a small sample of our subscriber-only offerings. A full subscription unlocks daily long-form feature stories, newsletters and podcast extras. To subscribe, head to the Ken.com and click on the red subscribe button on top of the Ken website. Today's episode was hosted by Snittha Sharma and edited by Rajiv Siyah.