The vision of a Viksit Bharat by 2047 is not just about achieving economic growth, it’s also about building social equity in a country with such diverse demographics.
At the core of this vision is financial stability, which is capable of withstanding uncertainties and challenges. The insurance sector, often considered the safety net of the economy, plays a crucial role in driving this financial as well as social change.
Yet, the journey is not without its challenges. Insurance penetration remains low, with term insurance reaching just three percent of the population, and nearly 48 percent of all medical expenses still being paid out of pocket. For many, insurance remains out of reach due to issues such as low access and lower awareness. In other cases, affordability struggles and a long-standing perception of an unpleasant claims experience act as a barrier. These factors leave several families vulnerable, which can turn life's unexpected twists into financial hardships.
However, India has been at a turning point over the last decade. With positives like growing digitisation, progressive regulatory policies, and a gradual rise in awareness, this is the opportunity to reimagine the insurance landscape. This is the time to make insurance a necessary and trusted addition to every portfolio to build a truly inclusive and secure Bharat.
LOW AWARENESS, SLOW UPTAKE: THE ROADBLOCKS TO INSURANCE GROWTH
Insurance often finds itself at the bottom of the priority list for middle-class families, lagging behind essential expenditures. The absence of instant gratification makes it an even harder sell in a price-sensitive economy. A recent report shows that India’s insurance penetration, which is measured as a percentage of GDP, stands at just 4.2 percent, compared to the global average of seven percent.
Awareness issues run deeper than surface-level understanding. While many recognise the need for insurance, there's a limited understanding of critical aspects such as product types, coverage adequacy, or the benefits of early adoption. For instance, in 2023-2024, India's per capita insurance premium, or insurance density, was $95, which is a slight increase from $92 in 2022-2023. However, this is still well below the global average of $889. This indicates both underinsurance as well as under-utilisation.
The problem gets compounded by procrastination. Financial decisions like insurance are often deferred, where families underestimate the cost of delay. A 30-year-old opting for life insurance pays up to 50 percent less in premiums compared to someone starting at 40. The inertia in insurance, however common, comes with a steep price.
EXPANDING ACCESSIBILITY AND AFFORDABILITY TO EVERY CORNER OF BHARAT
Insurance in India has historically been concentrated in urban markets, with Tier 1 cities accounting for the major share of policies. That is changing. A mix of technology and focused policy initiatives are pushing insurance deeper into Tier 2, and Tier 3 cities and rural areas. A women-focused distribution channel like Bima Vaahak or a scheme like LIC’s Bima Sakhi aims to enhance insurance inclusion, especially in rural areas. This isn’t just about reach—it's about embedding insurance into the financial ecosystems of communities that have traditionally been underserved. In recent years, products have also evolved to cater to women consumers with offerings like independent term plans for homemakers or a low waiting period for maternity coverage.
Accessibility isn’t only about covering geography but also ridding the process of operational challenges. Digitisation has helped expedite this process by improving efficiency in the distribution models. Phygital (physical+digital) models are filling the gaps where digital access needs to be complemented by the human touch. The next phase of growth will depend on how well insurers can integrate these models without creating silos between urban and rural strategies.
AFFORDABLE, EASY-TO-UNDERSTAND PRODUCTS FOR THE MASSES
Policybazaar’s 2023 study titled How India Buys Insurance revealed that owing to insufficient funds to pay the premiums, a majority of the population held off purchasing or renewing their health and life insurance policy. The study also pointed towards the need to create simpler products that offer key benefits minus the frills to ensure that affordability doesn’t come in the way of financial protection.
Affordability is not just about premiums, it’s about getting value for money. Data-driven underwriting models are allowing insurers to design products that match individual risk profiles more precisely. Personalised pricing, flexible payment options, and modular products are aiding this approach. Moreover, seamless claims processes, in line with regulatory reinforcement, are helping alleviate long-standing concerns about transparency and reliability. Also, insurers are leveraging AI and advanced analytics for underwriting and claims to address the rampant trust deficit as well as affordability. The asymmetry of information, once a roadblock for both consumers and insurers, is now being replaced by data-backed transparency.
INNOVATION AND CAPITAL FOR BUILDING A RESILIENT ECOSYSTEM
The insurance sector's ability to grow will depend on its capacity to innovate, adapt, and attract investments. With only around 70-plus players currently catering to the most populous country, the sector needs more stakeholders, diverse products, and capital infusion to scale sustainably. Technology, meanwhile, will continue to level the playing field.
Achieving the vision of insurance for all will require addressing these critical gaps with caution. But once executed well, insurance will not just be a product, it will be an enabler of India’s growth story. It will ensure that the financial resilience of households mirrors the economic resilience of the nation. By 2047, insurance must no longer be viewed as an option, but an integral pillar of financial well-being.
The author is Joint Group CEO, of PB Fintech, an online platform for insurance and lending products.
