How Tier-3 Cities Are Powering India’s Insurance Growth in FY25

India’s insurance industry is witnessing a powerful shift. In the first quarter of FY25, Tier-3 cities contributed a staggering 62% of new insurance premiums, signaling that the next wave of growth is coming from small towns and semi-urban India.

There are several reasons behind this surge. The biggest driver is digital penetration in insurance. With easy access to smartphones, online platforms, and regional content, people in Tier-3 cities are now more aware and confident about financial planning. Additionally, post-pandemic insurance awareness has changed how people view health and life coverage. What was once seen as a luxury or a tax-saving option is now a necessity, especially after COVID-19 highlighted the importance of financial security and emergency preparedness.

A key factor in this transformation is the role of insurance tech platforms and trusted local agents. InsurTech companies are using mobile apps, paperless onboarding, and simplified plan structures to make health and life insurance in India more accessible. At the same time, agents in Tier-3 cities are embracing tools like WhatsApp and video calls to explain policies and help customers make informed decisions. Interestingly, both health insurance uptake and life insurance adoption are growing in these regions. Family floater plans, senior citizen insurance policies, and basic term life cover are especially popular among first-time buyers. These families are seeking affordable insurance with long-term value and comprehensive coverage.

The dominance of insurance in small towns is not a passing trend—it’s a long-term shift. Insurers now need to focus beyond metro cities and align their offerings with the needs of rural and semi-urban customers. This includes creating more inclusive products, strengthening local networks, and ensuring digital ease of access. As FY25 unfolds, India’s insurance industry is no longer centered in metros. It's expanding into Tier-3 cities, making the future of insurance more inclusive, digital-first, and deeply rooted in the real needs of everyday Indians.