AU Small Finance Bank Partners with LIC to Broaden Life Insurance Reach | Insurance News July 2025

India’s largest small finance bank has announced a new partnership with the country’s largest life insurer. AU Small Finance Bank (AU SFB) has entered into a bancassurance tie-up with Life Insurance Corporation of India (LIC), enabling it to distribute LIC’s full suite of life insurance products across its national banking network.

From term insurance to savings plans, annuities, and child-specific policies, all of LIC’s products will now be available through AU’s more than 2,456 branches spread across 21 states and 4 Union Territories. With a customer base of over 1.13 crore as of March 2025, AU SFB provides deep regional access to LIC, particularly in smaller towns where awareness and accessibility remain limited.

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What This Means for LIC and AU SFB

This partnership is not formally described as exclusive, but there’s no mention of other insurers in AU SFB’s distribution pipeline either. For now, it appears to be a single-insurer arrangement, with the flexibility for AU to evolve its model over time.

For LIC, which has historically relied on agents and offline channels, this partnership represents a significant step toward expanding its customer base. AU SFB, on the other hand, moves closer to offering a complete suite of financial services by adding life insurance to its existing portfolio.

This arrangement also aligns with the government’s “Insurance for All by 2047” initiative. With 61% of AU SFB’s branches located in Tier 2 to Tier 6 cities, LIC now has a direct route to reach underserved customers who often lack insurance knowledge.

Here’s What the Top Executives Say About LIC & AU SFB Bancassurance Partnership:

Uttam Tibrewal, Executive Director and Deputy CEO of AU SFB, said:

“By leveraging our distribution strength and LIC’s trusted insurance products, we aim to provide comprehensive protection and retirement solutions to customers across Bharat and enhance a comprehensive banking experience.”

In its official communication, LIC highlighted that the partnership would help “extend life cover and financial planning access to India’s underserved population” through AU’s widespread branch network.

Is Bancassurance New for LIC?

No, but it’s gaining momentum. LIC has offered policies through banks for years, with IDBI Bank as its largest bancassurance partner. As of FY 2023–24, LIC has tie-ups with 85 banks and over 500 other partners (corporate agents, brokers, IMFs, CSCs).

This channel generated over ₹2,078 Cr in new premiums from 3.32 lakh policies, contributing 3.6% to LIC’s new premium business. Banks are the most significant driver within this group, contributing nearly 79% of the premium.

How the Market Reacted to LIC & AU SFB Partnership

Following the announcement, both AU Small Finance Bank’s stock rose by roughly over 1%, and LIC remained flat. While no analyst reports have surfaced yet, the positive market reaction suggests investors believe the alliance will boost both top-line revenue and customer acquisition metrics.

And we feel this makes perfect sense. When the largest small finance bank, with its deep rural distribution, partners with India’s most trusted insurer, it bridges a gap between supply and awareness. And in a low-penetration sector, where just 3.7% of the population is covered by insurance, that’s exactly the kind of alignment that moves the needle.

LIC’s Performance Metrics

When compared to private insurers like HDFC Life, ICICI Prudential, or Axis Max Life, LIC’s premiums are noticeably higher. Private players often offer better coverage features such as critical illness riders, waiver of premium on disability, or increased coverage during life milestones, all at relatively affordable premiums. Let’s take a look at them now:

Ditto’s Take on the LIC-AU SFB Partnership in 2025

“For LIC, this partnership means reaching a wider audience. For AU, it means retention. And for the customer, it means real access to term plans, savings options, and retirement tools without having to navigate the mess on their own.

That said, we’d love to see LIC leverage this opportunity to lean harder into protection-focused products, such as simple term plans or micro-insurance, tailored to the needs and incomes of these segments. Ultimately, insurance should be about protection, not complicated investments. And the more affordable and accessible it is, the faster we move toward our 2047 goal of getting every Indian insured.”

— Senior Advisor, Ditto Insurance

Conclusion

Over 80% of the population still lacks adequate life cover, such partnerships could be the fastest path to change. AU SFB’s rural dominance and LIC’s legacy trust make them a powerful combo for closing this gap.

But as always, accessibility is just the start. The real test lies in simplifying complex policies and building customer awareness around product suitability. And that’s where Ditto comes in: we break down your options, compare insurers, and help you pick the right policy in a free consultation. It sure beats reading 40 pages of fine print on your own.