Insurance For All By 2047: How Irdai’s Big Reforms Aim To Bridge India’s Protection Gap

Most Indians buy insurance only when a deadline to save taxes is looming, their bank manager pesters them, or just after facing a financial emergency. Insurance is still perceived as discretionary spending for millions of households and not as an indispensable component of financial planning. India has the fourth-largest insurance market in the world, yet penetration is a lowly 3.70 per cent, leaving a lot of distance to cover if the Narendra Modi government is to realise its ambitious plan of ‘Insurance for All by 2047’.

To increase coverage and fill this protection gap, the Insurance Regulatory and Development Authority of India (Irdai) has announced a slew of measures to simplify insurance and make it more accessible and affordable. From digital platforms, such as Bima Sugam and last-mile initiatives, such as Bima Vahak, to more flexible regulations for insurers and greater use of technology, the reforms seek to expand insurance beyond urban India and into underserved communities.

Significance Of The Latest Irdai Reforms

According to industry experts, the latest Irdai reforms signal a shift from regulating insurers to building an insurance ecosystem centred on access.

Says Debashish Banerjee, partner, Deloitte India: “Bima Sugam will create a unified digital marketplace for policy purchase, servicing, and claims; Bima Vahak will establish a women-led last-mile distribution network; the revised Expenses of Management (EOM) and commissions framework will give insurers greater flexibility to allocate distribution investments; simplified registration norms will encourage new entrants and innovation; and strengthened policyholder protection and governance reforms will improve trust. Together, these reforms address structural barriers to achieving Insurance for All by 2047.”

How Recent Reforms Can Improve Insurance Penetration

No single reform can transform any sector; the same holds true for insurance as well.

According to Banerjee, sustainable progress will require the right combination of reforms implemented in the right sequence. He says the next wave of distribution reforms is likely to have the greatest impact because performance-linked commissions will fundamentally reshape how the industry operates.

India’s challenge is no longer product availability but the cost and economics of reaching the next 500 million, particularly the under-insured and uninsured. Flexible EOM regulations and more efficient distribution channels can reduce acquisition costs, strengthen last-mile reach, and make smaller-ticket products commercially viable, he said.

“At the same time, 100 per cent foreign direct investment (FDI) and lower capital requirements for new reinsurers will strengthen market capacity, capital availability, and product innovation. The move towards risk-based capital and supervision should also promote the right governance and behaviours, which will be critical in the next wave of reforms. India already has around 75 insurers and nearly 8.30 million distributors, yet insurance penetration remains only 3.70 per cent, underscoring that expanding access, not merely increasing capacity, is now the critical priority,” Banerjee adds. 

Biggest Barriers Preventing Wider Insurance Adoption In India

Regulatory reforms alone cannot bridge India’s protection gap. Low financial awareness, affordability constraints, limited last-mile distribution, products that are not always fit for purpose, and persistent trust deficits continue to suppress demand. Many consumers still perceive insurance primarily as a tax-saving or investment product rather than financial protection, while rural and informal markets remain commercially difficult to serve.

“Addressing these barriers will require stronger financial literacy, simpler, fit-for-purpose products, wider digital and physical distribution, and the building of customer trust through a consistent and transparent claims experience. Equally important is the availability of trusted, high-quality data that can be leveraged for public use. Whether developed by the government or through public-private partnerships (PPP), such data will be critical for improving product design, pricing, risk assessment, and ultimately expanding insurance penetration,” Banerjee adds.

Balancing Business Growth With Customer Protection

Industry experts say growth and customer protection should reinforce each other rather than compete. Insurers should leverage digital distribution, innovative business models, data, analytics, predictive modelling, and artificial intelligence (AI) to improve customer acquisition, underwriting, and product suitability while lowering distribution costs. Customer trust and faster claims are built during underwriting, not at the claims stage, through appropriate risk assessment, transparent products, and clear disclosures.

“Mature markets demonstrate that insurers focused on profitable growth consistently outperform those pursuing topline growth alone. For underserved markets, understanding affordability, customer behaviour, and local needs is essential for designing fit-for-purpose products that deliver sustainable, profitable growth, in line with the company's underlying philosophy,” Banerjee adds.

Role Of Technology And Data In Making Insurance More Accessible And Inclusive

Technology has become the backbone of inclusive insurance and embedded products. Multiple ecosystem platforms, combined with application programming interface (API)-led connectors, advanced analytics, and AI, and India’s Digital Public Infrastructure, can simplify onboarding, underwriting, servicing, and claims while lowering distribution costs.

Data-driven insights will also enable insurers to personalise products, improve fraud detection, as well as serve previously underserved segments more efficiently. However, sustained adoption will depend equally on robust cybersecurity, consent-based data sharing, and responsible AI governance to preserve customer trust.

Additional Policy, Industry Interventions Needed To Achieve ‘Insurance For All By 2047’ Vision

Banerjee says the next phase should focus as much on execution and sequencing as on introducing new reforms. India has announced several important reforms, but their timing and sequencing must be strategically planned rather than reactive, allowing the industry to absorb, implement, and build on each reform rather than operate under constant regulatory change.

“Composite licences, risk-based supervision, AI governance that encourages innovation without compromising trust, stronger Digital Public Infrastructure, embedded insurance, public-private data partnerships, interoperability, and more efficient medical underwriting will all be important. Equally important is redefining how progress is measured. Alongside penetration and density, policymakers should track insurance infrastructure per lakh population, including the number of insurers and agents, unique policyholders, and uninsured regions down to the panchayat level,” says Banerjee.

Much like healthcare tracks doctors per 1,000 people or banking tracks branches per lakh population, this would provide a more meaningful measure of whether insurance is becoming genuinely accessible across India, he adds.

“We also need to strengthen some mandatory aspects for public safety, such as fire and disaster liability cover for malls and commercial establishments, high rise residential complexes, and certain professional indemnity covers, very much like motor third-party insurance, and Ayushman Bharat, among others,” Banerjee further says.