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India has set itself a lofty goal of insurance for all by 2047. However, Statista reports that the country’s insurance penetration hovered at a mere 4% in 2023. How can digital innovation break the barriers and make insurance a reality for all Indians? Vishal Gupta, CEO, PhonePe Insurance, sat down with Ranjan Crasta, Consulting Editor, The CapTable, at TechSparks 2024 for an in-depth fireside chat on ‘Insuring India: Breaking barriers with digital innovation’.

The conversation covered how fintech platforms are revolutionising insurance through personalised products, microinsurance offerings, and enhanced consumer experience, making it more inclusive for Indians across the country. 

Awareness, accessibility, affordability

Gupta began by offering a key insight: the fact that many Indians are not covered by insurance has a profound impact on India’s Gross Domestic Product (GDP) growth. He shared that each year with low health coverage results in a hit of around 6-7% to India’s GDP.

The PhonePe Insurance CEO cited three avenues to solve India’s low insurance penetration – awareness, accessibility, and affordability. Customers need to know why they need insurance, then they need to be able to easily access platforms or people who can provide it, and finally they need to be able to afford it, he said.

These solutions seem simple and straightforward, but India’s massive demographic complicates endeavours. “The only way to reach every nook and cranny is through digitalisation,” Gupta said.

He surmised that insurtech companies will be able to offer a simplified experience to the customer by leveraging the best digital public infrastructure. “Digital distribution will solve the problems of both reach and affordability.”

Keeping insurance simple

Insurance often seems like a complex and daunting product to the average Indian. “No one wakes up in the morning and says, ‘I want to buy insurance’. It’s a push product,” Gupta said.

Education is critical and customers need to understand how lack of insurance can impact their lives. Gupta shared that people without insurance can experience a freefall in fortune at critical junctures, with around 5-6% of people falling below the poverty line because of inevitable events in their lives.

Gupta also spoke about how middlemen sell insurance by ramping up the complexity of their sales pitch, and suggested simplified products for India. For instance, PhonePe lets customers buy motor insurance in 30 seconds.

He also emphasised the need for personalised insurance products, which will be tough given India’s diversity. But he said digitalisation was the path ahead, the only way that insurance companies can sell products that suit customers, as opposed to the insurer. 

Balancing regulation and innovation

Gupta believes that in the heavily regulated insurance industry, companies and regulators need to find a sweet spot where regulation and innovation combine to offer a product that favours the customer.

In the last few years, healthy regulations have been issued with a view to create long-term change in the industry. Regulations that push digital insurance solutions, while leaving enough room for offline insurance to flourish as well, are the need of the hour.

PhonePe has changed the game when it comes to greater insurance adoption, selling over 9 million overall policies since September 2021. However, the company has no interest in resting on its laurels. It is now looking at breaking a key barrier to insurance penetration with a new feature : ‘Pre Approved Sum Assured (PASA)’.  

Providing proof of income is one of the biggest hurdles when it comes to buying insurance, particularly life insurance. Gupta said income is a significant proxy for “what a customer is worth and how much they have achieved”. However, customers often struggle with uploading their proof of income. Recognising this, PhonePe worked with reinsurers and insurers to find a middle ground – where customers can provide a proxy for their income. In the process, the company has whitelisted around three crore people who are eligible to buy term life insurance without providing income proof.