A large company with 1,000 employees is a natural customer for a life insurer. One employer, one set of employee records, one group policy.
Now distribute those same 1,000 workers across 200 small businesses, each employing five people.
Their families need financial protection just as much. But the economics of reaching them, enrolling them and keeping them insured are very different.
This, I believe, is one of the more interesting opportunities for India’s life insurance industry. Not another product for the entrepreneur. A new way of reaching the people who work for the entrepreneur.
The workforce behind the MSME growth story
The Ministry of Statistics and Programme Implementation’s Quarterly Bulletin of Unincorporated Sector Enterprises, released in August 2026, estimated 8.67 crore establishments and 13.70 crore workers in the unincorporated non-agricultural sector during April–June 2026.
But look at the composition. Working owners accounted for 62.38% of the workforce. Hired workers accounted for 22.77%, or approximately 3.12 crore people. Other workers, including unpaid family workers, made up the remainder.
Only 12.13% of establishments employed hired workers on a fairly regular basis.
These are survey estimates for unincorporated manufacturing, trade and services, not a count of all MSME employees or people without insurance. But they point to an important question: how do we bring life insurance to a large workforce spread across small employers?
The product exists. The distribution model is the challenge.
India already has group term life insurance.
For example, the published terms of HDFC Life Group Term Life and ICICI Pru Group Term Plus specify a minimum of ten members for their respective employer–employee groups. These are product-specific conditions, not a universal market rule.
Think of a garment workshop with five workers, a small restaurant with eight, or a repair unit with four. Each may fall below the minimum for these products.
An insurer could reach them individually. But the acquisition and servicing cost of a small policy can be difficult to justify.
The challenge is not a lack of customers. It is finding a financially viable way to serve them.
What would 1% of employee costs buy?
The Annual Survey of Unincorporated Sector Enterprises 2025 puts annual emoluments per hired worker at ₹1,46,550. This includes more than cash wages, so actual payroll will differ from business to business.
One per cent of that amount is approximately ₹1,466 a year, or ₹122 a month.
For a small business employing 20 people at this benchmark, the annual budget would be approximately ₹29,310.
Could an employer allocate that amount towards life insurance for its workforce? And could insurers design an appropriate, sustainable protection proposition within such a budget?
This is a question to test, not a premium quotation. The cover that can be purchased will depend on age, occupation, group composition, underwriting and the product. Nor does a small death benefit automatically mean a family is adequately protected.
There is another consideration. Since 22 September 2025, individual life insurance has been GST-exempt, while group term life continues to attract 18% GST, as clarified by the Department of Financial Services. For some very small businesses, facilitating individual cover may therefore deserve as much attention as buying a group policy. Comparable quotations, not tax treatment alone, should decide.
Insure the cluster, but respect the group
Consider 100 garment manufacturers in an industrial cluster. Each already knows its workforce. An industry association understands the local businesses. A regulated insurance distributor and an insurer can bring the product and service infrastructure.
Why must each employer solve the entire problem independently?
Shared administration could reduce duplication in onboarding, employee records, renewals and claim assistance. Eligible employers could retain their own group policies, while smaller employers could help workers access suitable individual protection.
There is also scope to examine genuine association-based groups. The IRDAI Master Circular on Life Insurance Products of 12 June 2024 recognises employer and specified non-employer group structures. But an industry association’s membership does not automatically make every employee of its members eligible for one group policy. The structure must comply with the applicable rules and insurer terms.
India already has a useful precedent. The Ministry of Textiles has been implementing PMJJBY and PMSBY for eligible handloom weavers and workers through States and Union Territories since 2021–22. That demonstrates how an occupational ecosystem can help organise access to insurance. The commercial model still has to be tested.
The worker should not lose protection when the job changes
This may be the most important part of the opportunity.
A worker leaves a small factory in Bihar, joins another in Delhi and later returns home. Employer group life cover may end when the worker leaves the group, depending on the policy terms.
Why build the entire protection arrangement around the continuity of a job that may not be permanent?
I would propose two layers. The first is personal protection that can continue independently of a particular employer: PMJJBY, where eligible, or suitable individually owned life cover. The second is additional employer-funded group insurance while the worker remains eligible.
PMJJBY offers ₹2 lakh of death cover at a full annual premium of ₹436, subject to scheme conditions. Eligible EPF members may also have death-in-service protection through EDLI, which provides benefits of up to ₹7 lakh. These should be checked before recommending additional cover, not replaced by it.
The employer becomes the entry point. The worker’s family remains the reason for the insurance.
A practical place to begin
I would start with one industrial cluster in Bihar and 100 willing MSME employers. Map the workers’ existing benefits, obtain actual insurer quotations, test what employers are prepared to contribute, and measure how many workers remain insured after twelve months and after changing jobs.
Do not begin with a premium target. Begin with a protection target. Then establish whether the economics can support it.
India’s MSME story is usually told through enterprises, jobs, credit and investment. Perhaps we should add another measure: how many of the families behind those jobs have financial protection when a breadwinner dies?
The size of the employer should not determine the financial security of the worker’s family.
That is an opportunity for life insurers, small businesses and policymakers alike.
Research note: The workforce figures are from MoSPI’s April–June 2026 QBUSE; the emolument benchmark is from ASUSE 2025. The two surveys have different reference periods. The 1% budget and Bihar pilot are proposed concepts, not established product prices or approved schemes. No nationwide MSME-worker life insurance coverage gap has been established by the cited sources.