India's insurance sector has presented comprehensive expectations for the upcoming Union Budget 2026, focusing on regulatory reforms and policy measures to accelerate growth and market penetration. The industry seeks structural changes including composite licensing, tax rationalization, and risk-based capital frameworks to optimize operations and enhance accessibility.

Sector Performance and Growth Trajectory

The insurance sector has demonstrated consistent growth over the past decade, driven by regulatory liberalization, digital acceleration, and increased financial awareness. The Insurance Regulatory and Development Authority of India (IRDAI) reports significant expansion in the sector's financial metrics:

The IRDAI has implemented several structural reforms contributing to this growth, including the introduction of the "use and file" product regime in 2016, simplified licensing norms in 2024, and the liberalization of FDI to 100 percent in 2025. These measures have enhanced operational flexibility and eased market entry for insurers.

Key Budget Expectations

Composite Insurance Licensing Framework

The industry prioritizes the expedited implementation of IRDAI's composite licensing regime, which would allow unified operations across life, non-life, and health segments under a single license. This framework aims to:

• Optimize resource utilization and reduce Expenses of Management (EoM)
• Enable cross-selling opportunities across product lines
• Improve overall risk management capabilities
• Implement clear prudential safeguards with fund segregation

GST and Tax Benefits Rationalization

Specific tax-related measures requested include:

• Exemption or zero-rate GST on insurance agent commissions
• Full Input Tax Credit (ITC) allowance on distribution expenses
• Enhanced deductions for term and health insurance under Section 80D
• Creation of new section for comprehensive insurance premium benefits

Risk-Based Capital Framework

The sector advocates for capital requirements aligned with company risk appetite, particularly for organizations focusing on micro-insurance and affordable products for rural and semi-urban areas. This approach would provide calibrated capital incentives and corporate rebates for targeted market segments.

Policy Recommendations

Climate and Parametric Insurance Incentives

The industry recommends establishing sovereign reinsurance backstops or co-funding guarantees for climate-linked and parametric insurance pilot schemes. This initiative would:

Technology and Skill Development Support

Recommendations include R&D incentives for insurers adopting AI, IoT, and alternative data for underwriting and fraud detection. The proposal encompasses creating a joint public-private Insurance Data Exchange Hub integrating various data sources under privacy-preserving architecture.

Health Claims Transparency

The sector seeks enhanced oversight mechanisms for hospital pricing and integration of the National Health Claims Exchange (NHCX) with direct audit trails. Key objectives include:

• Faster settlement processes between insurance companies and hospitals
• Introduction of penalties for delayed settlements
• Continued focus on rapid claims settlement
• Enhanced transparency in the claims ecosystem

These comprehensive expectations reflect the industry's commitment to achieving the government's "Insurance for All by 2047" vision while addressing the substantial protection gap in health, life, and catastrophic event coverage across the country.

As India approaches the Union Budget for FY26-27, investors are preparing for heightened market volatility that historically accompanies this significant policy event. The Union Budget remains one of the most influential events for Indian equities, often reshaping sectoral leadership and driving market trends in both short and medium terms. This year's Budget is expected to maintain focus on capital expenditure, manufacturing-led growth, and macroeconomic stability amid global uncertainties around growth, geopolitics, and interest rates.

Expert-Recommended Portfolio Allocation Strategies

Market experts emphasize diversification and balance as key themes for Budget 2026 positioning. Rather than taking aggressive sectoral bets, analysts recommend maintaining exposure to stable large-cap stocks while complementing equity positions with defensive and alternative assets.

Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, advocates for balanced portfolio construction ahead of the Budget. Sheth recommends an ideal allocation including 50% in large-cap equities, 30% in gold, 10% in silver, and 10% in bonds, designed to offer stability amid policy-driven volatility.

Technical Analysis Perspective

From a technical standpoint, large-cap stocks continue providing relative strength and trend stability during uncertain phases. Aakash Shah, Technical Research Analyst at Choice Equity Broking, suggests portfolios should remain core-heavy on large caps while selectively adding mid-caps showing strong technical setups.

Shah's recommended structure includes:

• 50-55% exposure to large caps for stability
• 25-30% allocation to select mid-caps with strong technical indicators
• Remaining allocation in cash or defensive positions to capitalize on post-Budget corrections

Long-term Strategic Considerations

While short-term Budget volatility is inevitable, experts stress the importance of maintaining long-term asset allocation discipline. Vikas Gupta, CEO and Chief Investment Strategist at OmniScience Capital, emphasizes diversified exposure in the current environment.

Gupta describes this framework as offering resilience for the year ahead while maintaining exposure to structural growth themes with adequate downside protection.

Market Positioning Recommendations

V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, emphasizes prioritizing equity exposure with a stability tilt. His approach includes maintaining higher weightage to equities, moderate exposure to gold, lower allocation to fixed income, and keeping large caps as core holdings going into the Budget.

Experts agree that staying diversified, avoiding knee-jerk reactions, and focusing on long-term fundamentals can help investors navigate near-term volatility while remaining positioned for opportunities emerging from policy announcements. The consensus centers on balanced approaches that provide both growth potential and downside protection during this critical policy period.