Why Union Budget 2026 could be crucial for expanding insurance coverage in India

India stands at a crossroads, grappling with rising healthcare costs, climate change impact and the vulnerable underbelly of its MSME sector. Insurance, long relegated to the margins of financial planning, is emerging as an indispensable shield for fostering economic resilience, not as a mere afterthought but a critical policy lever. With Union Budget 2026 approaching, the focus is firmly on how targeted fiscal and structural measures can make insurance more accessible, affordable and relevant for large sections of the population still outside the protection net.
Against this backdrop, a conversation with Girija Subramanian, Chairman-cum-Managing Director of The New India Assurance Co. Ltd., dives deep into the expectations from Budget 2026 and the role it can play in accelerating insurance penetration. From addressing the ‘missing middle’ in health insurance and scaling up parametric solutions for climate shocks, to bridging the MSME protection gap and harnessing digital and physical distribution, she outlines how policy support can translate the vision of ‘Insurance for All by 2047’ into reality.

Q1. What are New India Assurance's top expectations from the Union Budget 2026 to boost insurance penetration in India?

We expect the Union Budget 2026 to introduce measures that enhance insurance accessibility and affordability across India. While nil GST has provided a fillip to the health insurance sector, Tax incentives for policyholders to encourage voluntary health insurance adoption even under the new tax regime may also be considered to further boost the segment. While PMJAY covers the poor and individual health policies cover the upper middle class, some incentive to the ‘missing middle’ to purchase health insurance may be considered. The Government can also explore the possibility of amending the GST exemption list of individual health, personal accident, and rural business as zero-rated, as this will avoid loss of ITC to the Service Sector, such as insurers, and encourage them to do zero-rated business in higher volumes, thereby increasing penetration and economic stability.


Q2. New India Assurance recently launched parametric insurance for climate risks. How can Budget 2026 accelerate the adoption of climate insurance solutions across India?

The gap between insured losses and economic losses when a CAT event happens is a cause of serious concern. Parametric insurance is an ideal way to provide immediate relief to the affected people. However, this has to be driven on a large scale, which can be done only by the governments. A budgetary allocation for a specific fund allocated for purchasing either conventional NATCAT covers or parametric covers will be helpful to ensure that people are protected from loss of property and contents in the event of a catastrophe. Providing access to the Government’s datasets – IMD, ISRO, CWC, at affordable or zero cost, facilitating training programmes for state officials and local administrations in the nuances of parametric insurance, and supporting a national parametric risk pool are some steps that will help accelerate the adoption of climate insurance solutions. New India has launched parametric insurance, Nischit Suraksha, and the product is finding good traction.

Q3. With MSMEs forming the backbone of India's economy, what insurance reforms should Budget 2026 prioritise to close the MSME protection gap?

MSMEs are the lifeline of the country. However, the segment suffers from low insurance penetration. Internal market scans revealed that <15% of India’s 66 million MSMEs are adequately insured despite more than 70% having experienced operational or climate-related shocks in the past three years. New India has interesting package products targeting the MSMEs, but building awareness and increasing penetration will take time. A push from the government will be of great help here. Just like the MSME credit guarantee scheme, the government can consider some support for the MSMEs to purchase relevant insurance products. New India will be in the forefront to ensure that any such scheme that is launched is successfully rolled out. Affordability is one of the major reasons for many of the MSME units to remain uninsured. Through simplified products and distribution norms and a lower GST rate, the Government of India can make insurance products affordable to the MSME sector and thus bridge the protection gap.

Q4. How is New India Assurance leveraging digital transformation, and what policy support do you expect from Budget 2026 to advance the 'Insurance for All by 2047' vision?

New India is leveraging technology in areas like automatic claim processing to provide quick service to the insured. Technology can be leveraged with the help of the insurtech platforms to drive penetration using both physical and digital modes. The physical mode would involve recruitment of agents, especially in rural areas, training them, and using them to sell pre-underwritten products. Digital mode will involve using technology to sell byte sized insurance covers which address specific needs but are too low-priced to interest the intermediaries. A budgetary support to the rural Bima Vahaks in rural areas until they scale up will go a long way in increasing the insurance penetration and realising the Government’s vision of ‘‘Viksit Bharat – 2047’

As India prepares for its next phase of economic transformation, the conversation underscores how insurance must evolve from a discretionary purchase to a foundational pillar of resilience. The insights point to Budget 2026 as a potential inflection point, one where calibrated tax, regulatory and budgetary interventions can help insurers partner with the government in building a more secure, climate-ready and inclusive India.