Digitised Claims Can Redifine Insurance, Says Sumit Madan

India’s life insurance penetration dipping from 3 per cent to 2.80 per cent in FY24 is a strategic concern. The gap between economic expansion and insurance inclusion signals the urgent need to reposition life insurance as a core instrument of financial resilience, and not merely a tax-saving or investment avenue.

At the heart of the challenge is lack of financial awareness. For too many households, life insurance is still a transaction, not a transformation. We must rebuild the narrative—from tax efficiency or returns to protection-first planning. Especially for middle-income families who remain one health emergency or income shock away from financial distress, protection must become the cornerstone of household financial architecture.

To address this, the industry needs a three-pronged approach:

First, democratise access through a rural-first, digital-led model. Today, distribution remains urban-centric. We need to bring protection to Bharat—by way of AI-enabled advisory tools, low-cost digital platforms, and contextually relevant alternate channels. Second, simplify the category. We must co-create modular, easy-to-understand products and push for regulatory sandboxing that accelerates innovation. Third, invest in sustained financial literacy—through vernacular education, curriculum integration, and community-led awareness.

This requires industry-wide collaboration, deep technology adoption, and purposeful public-private partnerships. We are intensifying our focus on tier-II and tier-III cities, where awareness is rising, but insurance penetration remains low. By expanding our footprint across these growth centres and embedding insurance into everyday financial behaviour, we aim to make life insurance more accessible, relevant, and timely. When life insurance becomes as instinctive as opening a bank account or making a digital payment, penetration will no longer need to be driven—it will follow trust, relevance, and inclusion.

The adoption of term life insurance in India remains worryingly low and contributes only 5–6 per cent of total individual retail premiums—a telling indicator of the gap between awareness and action.

Our latest India Protection Quotient (IPQ) 7.0 survey highlights this paradox: awareness of term plans has risen to 74 per cent, yet ownership remains at 34 per cent. This disconnect reflects a deep-rooted behavioural inertia—where individuals understand the need for protection but postpone or avoid it.

Term cover is often undervalued because it doesn’t offer returns. There’s also low urgency around mortality planning, especially among young earners, compounded by relatively lower distributor incentives and lack of sustained engagement on protection-led conversations.

We are addressing this through a multi-layered approach—redesigning the protection proposition to make it more relatable through flexible variants and bundled riders; rewiring our advisory model by upskilling frontline partners to lead with need-based conversations; embedding targeted term campaigns around key life events like first income, marriage, and home ownership; and partnering with employers and fintech ecosystems to integrate term solutions into employee benefit programs, thereby removing friction from the purchase journey.

Accelerating term insurance adoption requires industry-wide alignment—on rebalancing incentives, simplifying disclosures, and making protection a part of the mainstream financial culture.

Life insurance ownership has climbed to 78 per cent, up from 65 per cent in 2019, and the protection quotient has increased to 45.

Yet, gaps persist. Among Gen Z, only 35 per cent own life insurance today. Our internal insights show that although initial purchase intent is high, long-term policy continuation, especially among digitally acquired customers lags, due to factors, such as income volatility, lifestyle shifts, and limited financial buffers. Misinformation also remains a barrier. Many young consumers still perceive insurance as expensive, unnecessary in early life stages, or difficult to claim. Economic uncertainty in the post-pandemic gig economy further delays purchase decisions, leading to a protection gap despite awareness.

Trust in life insurance isn’t built at the time of purchase, it’s earned at the moment of a claim. With rising digital adoption, insurers must ensure that the trust historically delivered offline is replicated through seamless, transparent, and technology-enabled claims journeys.

At Axis Max Life, we have achieved a claims paid ratio of 99.70 per cent in FY25. Our ratio has remained above 99 per cent for six consecutive years now.

A key enabler of this consistency is our sharp focus on building a robust claims ecosystem, starting from the very first customer touchpoint. We have a strong onboarding mechanisms that ensures accurate disclosures, early detection of risk flags, and a consistent customer profile. Our fraud detection models are embedded at the issuance stage, filtering out high-risk cases upfront. This, coupled with a well-orchestrated end-to-end customer journey, significantly reduces downstream disruption and drives smooth, timely claim settlements.

Looking ahead, we believe the next industry leap must be regulator-led: the creation of a ‘Unified Claims Grid’. This interoperable system would connect Aadhaar-linked death registries, hospitals, and insurers—enabling near-instant claim validation. Standardised digital formats, industry-wide service level agreements, and advanced fraud analytics must support this transformation.

If UPI revolutionised payments, digitised claims can redefine how India trusts. The future demands not just speed—but transparency, personalisation, and empathy. And that’s what we’re building—claims that are not just settled, but delivered with integrity and care.

Article is contributed by Axis Max Life Insurance | This is not an Outlook Money feature