India has substantial headroom to expand insurance coverage, and financial technology companies can play a major role in reaching consumers who remain inadequately served by existing insurance products, according to Abhijit Phukon, Economic Advisor, Department of Financial Services, Ministry of Finance. (NewKerala.com)
Speaking at the India International Fintech Festival on August 7, 2026, Phukon said India’s insurance penetration remains at around 4–5%, below the global average, leaving considerable scope for expansion of the insurance market. (NewKerala.com)
Fintech Can Address the ‘Missing Middle’
One of the key opportunities identified by Phukon is the insurance industry’s “missing middle”—consumers who have the financial capacity to purchase insurance but are not adequately served by products suited to their specific requirements. (NewKerala.com)
Fintech companies could help address this gap by using technology and customer data to develop more personalised insurance products for different customer segments. Alongside product innovation, consumers need greater choice and improved awareness about the financial protection available to them. (NewKerala.com)
For the insurance industry, this points towards a move away from a largely standardised product approach. Digital platforms can potentially help insurers understand differences in customer income, occupation, geography, lifestyle, risk exposure and protection requirements and use these insights to develop more relevant propositions.
The opportunity is particularly important because improving insurance penetration requires more than simply increasing the number of policies sold. Products must be affordable, accessible and relevant enough for customers to perceive clear value in maintaining long-term insurance protection.
From Financial Inclusion 1.0 to 2.0
Phukon also called for India to move towards what he described as “financial inclusion 2.0.”
India’s first phase of financial inclusion concentrated substantially on providing people access to bank accounts and the formal financial system. The next stage, he said, should move beyond account ownership towards financial well-being and financial empowerment. (NewKerala.com)
This distinction is important for insurance. Access to a bank account may bring an individual into the formal financial system, but it does not automatically provide adequate protection against death, illness, disability, accidents, property losses or other financial shocks.
India’s broader financial-inclusion infrastructure has already reached considerable scale. The number of Pradhan Mantri Jan Dhan Yojana accounts increased from 14.72 crore in 2015 to 57.71 crore by March 2026, according to government data. (Press Information Bureau)
The next opportunity is therefore to use this expanding digital financial infrastructure to connect more households with insurance, pensions, credit and other financial services suited to their needs.
Technology Can Reduce Cost of Insurance Delivery
Fintech also has an important role in improving productivity, lowering costs and strengthening last-mile delivery of financial services, Phukon said. These capabilities will become increasingly important as India works towards its longer-term economic ambitions, including becoming a $30 trillion economy. (NewKerala.com)
For insurers, technology can potentially reduce friction across several parts of the insurance value chain—from customer onboarding and premium collection to policy servicing and claims processing.
Lower operating and distribution costs are particularly important when insurers seek to serve customers purchasing relatively small-ticket policies. Conventional distribution models may become economically challenging when acquisition and servicing costs are high relative to premium income.
Digital distribution, automated processes and data-driven personalisation could consequently help insurers design economically viable products for customer groups that have historically been difficult to serve.
Digital Public Infrastructure Provides Foundation
Phukon highlighted India’s Digital Public Infrastructure (DPI) and its principles of interoperability, scale and speed as an important foundation for the country’s next stage of financial inclusion. (NewKerala.com)
India’s broader government strategy has similarly identified the convergence of Digital Public Infrastructure and artificial intelligence as a mechanism for delivering scalable and secure financial services. Government initiatives have emphasised digital infrastructure capable of extending access not only to banking but also to insurance and pensions. (Press Information Bureau)
For insurance, such infrastructure could support easier customer identification, digital onboarding, premium payments and more efficient access to financial services across geographically dispersed populations.
AI Infrastructure Must Become More Accessible
Artificial intelligence formed another major part of Phukon’s address.
He called for the democratisation of AI computing infrastructure, along with measures to address technology skill gaps. Stronger collaboration between industry and academia will also be necessary to develop a workforce capable of operating in an increasingly technology-intensive financial-services environment. (NewKerala.com)
AI could have particularly significant applications within insurance, including underwriting, risk assessment, customer servicing, fraud analytics and claims management.
However, greater adoption also increases the importance of appropriate governance. Phukon stressed that AI deployment must be supported by adequate safeguards and guardrails, especially when the technology is used in financial services. (NewKerala.com)
Fraud Prevention Needs an Ecosystem Approach
The Finance Ministry official also highlighted the need to change how financial institutions address fraud.
Instead of banks, insurers, fintech companies and other entities building fraud controls independently in organisational silos, Phukon advocated an ecosystem-level approach based on shared services and common platforms. (NewKerala.com)
Such an approach recognises that financial fraud increasingly operates across institutional boundaries. A suspicious transaction or identity may interact with multiple banks, payment platforms or other financial institutions, making isolated detection systems less effective than collaborative mechanisms capable of identifying patterns across the financial ecosystem.
Artificial intelligence can strengthen fraud detection and prevention, but its deployment must simultaneously incorporate adequate controls and governance. (NewKerala.com)
Significant Opportunity for Insurers and Fintechs
The Finance Ministry’s observations highlight a broader change in the insurance-growth debate. Improving penetration will depend not merely on establishing more distribution points but on designing products that correspond more closely with the needs of customers who remain uninsured or underinsured.
The government’s recent insurance reforms are also intended to deepen penetration. The Sabka Bima Sabki Raksha (Amendment of Insurance Laws) Act, 2025 raised the foreign investment limit in Indian insurance companies from 74% to 100%, while also introducing measures aimed at improving ease of doing business and policyholder awareness. (Press Information Bureau)
Fintech can complement these policy initiatives by reducing delivery costs, widening digital access and enabling greater product personalisation.
The challenge for the industry will therefore be to convert India’s extensive digital infrastructure and growing fintech capabilities into meaningful financial protection. If technology can help insurers serve the “missing middle” with suitable, affordable and accessible products, it could become an important catalyst in closing India’s insurance protection gap. (NewKerala.com)
