Fintech seen as key to expanding India's insurance penetration

India's insurance sector holds significant untapped potential, and fintech innovation could be the key to unlocking it, according to a senior official from the finance ministry.

Speaking at the India International Fintech Festival, Abhijit Phukon, Economic Advisor in the Department of Financial Services, highlighted that India's insurance penetration stands at just 4-5 percent, well below the global average. This gap, he said, represents a major opportunity for growth.

Phukon emphasised the need for a wider range of products tailored to different customer segments, particularly the "missing middle" — consumers who have the financial capacity to buy insurance but lack suitable options in the market. He stressed that fintech companies are well-positioned to design these personalised offerings and help raise consumer awareness.

Beyond insurance, Phukon outlined fintech's broader role in improving productivity, cutting costs, and ensuring financial services reach the last mile, as India works toward its goal of becoming a USD 30 trillion economy.

He also called for a shift in focus from basic financial inclusion to what he termed "financial inclusion 2.0" — moving beyond merely opening bank accounts to ensuring they are actively used and contribute to the financial well-being and empowerment of account holders.

Phukon further advocated for democratising AI computing infrastructure, addressing technology skill gaps, and strengthening collaboration between industry and academia to build a future-ready workforce.

On fraud prevention, he urged a move away from isolated, silo-based approaches toward a collaborative ecosystem model built on shared platforms and services. While artificial intelligence is crucial for strengthening fraud detection, Phukon stressed that its deployment must be accompanied by proper safeguards and guardrails.