Sometime over the course of financial year 2025-26, the unthinkable will happen. The assets under management (AUM) in the Indian mutual fund industry will overtake those in the life insurance industry and end the current financial year just below the ₹80 lakh crore mark. Not just in terms of size, but also in terms of reach: Life insurance penetration (percentage of life insurance premiums to GDP) has remained stuck at less than 3% for over a decade, while the share of mutual funds in household savings has gone up to 8.4% in March 2023 from insignificant levels earlier.

While the mutual fund SIP has become a household name, the bad smell around mis-sold life insurance products refuses to go away. The reason for this change lies in the regulatory behaviour faced by these two industries. This is a text-book case which proves that an investor-first regulatory vision is good for the investor, the agent, and the industry.

What happened to an industry that was less than half the size of the gigantic life insurance industry a decade ago, that has grown big enough to overtake the latter? The power of good regulatory compounding has resulted in a growth rate of an annual average of 20% for over a decade for mutual funds. The 12% annual average AUM growth for the life insurance industry looks tepid........

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