New Delhi – India's next significant surge in health insurance adoption will originate from its smaller, non-metropolitan areas, according to Sarbvir Singh, Joint Group CEO of PB Fintech. Singh highlighted that first-time policyholders in Tier 2 and Tier 3 cities are the primary catalysts for this expansion, emphasizing the critical role of transparent policies and robust claims support in retaining these new customers.
Growth from Tier 2 & 3 Cities
Analysis from Policybazaar, a platform under PB Fintech, reveals a remarkable shift in the health insurance landscape. Between fiscal years 2022 and 2026, the number of fresh lives insured through the platform escalated by 277%. Crucially, first-time buyers from Tier 2 and Tier 3 cities saw an even more dramatic increase of 351% during the same period, significantly outperforming overall growth rates.
Singh underscored that expanding coverage to previously uninsured households is key to sustainable industry growth. “Insurance penetration moves only when someone who was outside the system comes in,” he stated, pointing out that smaller cities accounted for 67% of new buyers in FY26, up from 56% in FY22. This trend indicates that nearly seven out of ten additional first-time buyers are now emerging from these developing urban centers.
Rising Coverage Among Younger Buyers
The demographic profile of these new policyholders also indicates a significant trend. Many are younger individuals, typically in their late twenties and thirties, who are starting families and seeking comprehensive protection. Policybazaar data confirms that buyers aged 26-35 constitute 27.66% of first policies, with the 36-45 age group representing another 21.98%.
Notably, these newer entrants are opting for substantially higher coverage amounts. The average sum insured selected by first-time buyers has more than doubled, climbing from ₹6.3 lakh in FY22 to ₹13.1 lakh in FY26. Furthermore, the proportion of customers choosing coverage of ₹10 lakh or more surged from 32% to 68% over the same four-year span.
Ensuring Long-Term Customer Relationships
Attracting new customers is merely the initial step, Singh cautioned. He stressed the importance of fostering long-term relationships by ensuring new policyholders fully understand their coverage and receive unwavering support during the claims process. “Our job is to take them to a policy they understand, and then stand by them at the time of claim,” Singh elaborated.
He added that the initial experiences of these first-time buyers would profoundly influence their decision to remain insured for decades, thereby shaping the future trajectory of India’s health insurance industry. Treating a first policy as the foundation of a lasting customer relationship is essential for accelerating insurance penetration across the nation.