The insurance sector in India has substantially changed within the last twenty years. Policyholders are now spoiled today as many insurance companies compete to cover the large unexploited market, although it mainly consists of the public and the privately owned insurance companies. According to the insurance penetration in India, as stated in the IRDAI Annual Report 2022-23, it is 4.2 percent, with prospects of witnessing future growth. However, one thing is still common: whether to opt for a public or a private insurance company.
These two types have different advantages and disadvantages based on your financial objectives, the service you expect, and your risk capacity. To make a confident and well-informed decision, in this blog, we simplify the public and private insurance company in India – their functions with practical consideration options supported by statistics.
What Are Public and Private Insurance Companies?
The very fundamental difference is understood before plunging into comparisons.
The Government of India owns and operates (fully or partially) Public Insurance Companies. Examples are LIC, New India Assurance, and United India Insurance.
The Private Insurance Companies belong to private groups and can also be foreign partnerships. The top players include ICICI Prudential, HDFC Life, SBI Life, and Bajaj Allianz.
The Insurance Regulatory and Development Authority of India (IRDAI) also regulates both the public and private insurers in the country that provide a variety of life and general insurance products.
Market Share: Who Dominates India’s Insurance Industry?
As of FY 2022–23:
LIC (public) holds a market share of 62.6% in the life insurance segment.
Private life insurers collectively hold the remaining 37.4% share.
In general insurance, public insurers account for ~35%, while private players have increased their share to 65%, according to IRDAI.
This data highlights that while LIC still dominates life insurance, private insurers are catching up fast, especially in motor, health, and travel insurance categories.
Public vs. Private: Key Comparison Factors
Let’s compare public and private insurance companies across critical parameters:
1. Product Range and Flexibility
Public Insurers: Offer traditional plans like endowment and term plans. Product innovation is slower due to regulatory limitations and legacy systems.
Private Insurers: Provide customized, digitally enhanced products including ULIPs, riders, and plans tailored for millennials.
2. Claim Settlement Ratio (CSR)
LIC’s CSR (FY 2022–23): 98.52%
Private average CSR: 97.02%
While both sectors maintain high CSRs, LIC continues to lead. However, companies like Max Life and HDFC Life also boast excellent settlement records.
3. Customer Service and Digital Experience
Public Insurers: Often criticized for delayed responses and lengthy paperwork.
Private Insurers: Known for app-based policy tracking, chatbot support, instant issuance, and online claim filing.
4. Premium Affordability
Public companies tend to offer slightly lower premiums on basic term or traditional plans.
Private insurers, due to high marketing and customization, may charge more but offer added features.
5. Rural Penetration and Trust Factor
LIC and public players enjoy high trust in semi-urban and rural areas due to decades of presence and government backing.
Private insurers focus more on urban, salaried individuals with internet access.
How Regulation Levels the Playing Field
Both public and private insurance companies in India must adhere to IRDAI regulations. This ensures:
- Minimum solvency margin of 150%
- Standardized claim rejection rules
- Periodic solvency and audit checks
- Grievance redressal mechanisms
Hence, while ownership differs, customer protection remains equally strong across both types.
Why Do Some Prefer Public Insurance Companies?
- Government-backed, low-risk entities
- Ideal for traditional savers and conservative investors
- Simpler products with fewer terms and conditions
- Trust built over decades (especially LIC)
- Better suited for first-time insurance buyers
Example: Many Indian families still opt for LIC policies as a long-term savings and life cover solution.
Why Are Private Insurers Gaining Popularity?
Millennial-friendly: Targeted digital products with app access
Add-ons like critical illness riders, zero paperwork, and instant approval
Better suited for high-income individuals seeking personalized coverage
Offers investment-linked plans (ULIPs, Market-linked endowment)
Real India: What Consumers Prefer
According to a 2023 report by PwC India:
61% of urban policyholders aged 25–40 prefer private insurers due to digital access and variety.
68% of rural users prefer LIC or other PSU insurers due to familiarity and lower complexity.
80% of insurance buyers consider “claim settlement” as the most important factor.
This highlights the growing need for hybrid offerings – government-backed credibility with private sector innovation.
The Role of Technology in Insurance Decision-Making
Technology is rapidly transforming how Indians choose between a public and a private insurance company in India. With AI-based comparison tools, chatbots, and mobile-first insurance apps, consumers can evaluate coverage, benefits, and premiums in real time. Private insurers leverage this tech to improve customer onboarding and personalize offerings. While public insurers are gradually adapting to digital platforms like LIC’s mobile app and e-services, private companies are far ahead in automation and 24/7 assistance. For tech-savvy users who prefer managing policies online, private insurers deliver a faster, smoother experience. This digital shift is especially relevant for younger, urban policyholders.
Choosing Based on Life Stage and Goals
Your choice between a public or private insurance company in India should depend on your life stage and financial goals. For instance, early earners may prefer private ULIPs or term plans with riders, while retirees might trust LIC’s pension or annuity schemes. If you’re starting a family, a mix of both can help — traditional security from a public insurer, combined with flexibility from private players. It’s essential to evaluate risk appetite, coverage needs, and investment horizon. Diversifying your insurance sources — much like your investment portfolio — can provide better security and financial peace of mind.
Choose Smarter with Stashfin
Choosing between public and private insurance depends on your lifestyle, financial goals, and risk appetite. While public insurers offer trust and stability, private companies provide innovation and faster service. Regardless of your choice, maintaining financial discipline is key. That’s where platforms like Stashfin can support you. With instant personal loans, flexible credit lines, and responsible lending options, Stashfin helps you manage premium payments, emergencies, or policy lapses with ease. For financially smart decisions beyond insurance, Stashfin empowers individuals to stay protected and prepared in every stage of life. Visit Stashfin to know more.
