India's Effective Insurance Coverage Could Double in 5 Years: IRDAI Chief
IRDAI Chairman Ajay Seth aims to increase effective insurance coverage from 15% to 30% using digital tools and affordable products.
India is facing a significant protection gap, with only about 15 per cent of its population and businesses currently possessing effective insurance coverage. However, the Insurance Regulatory and Development Authority of India (IRDAI) believes this figure can be doubled to 30 per cent within the next five years.
Speaking at the SamvAAd 2026 India Open Finance Summit in Mumbai, IRDAI Chairman Ajay Seth highlighted the urgent need to expand financial protection across the country. During a conversation with author and financial educator Monika Halan, Seth expressed optimism that doubling the current coverage is a reachable goal if the industry shifts its approach.
The Gap Between Policy Sales and Actual Protection
One of the most striking revelations made by the IRDAI Chairman is how the industry currently measures success. Seth admitted that the 15 per cent figure is based on his best estimate because the sector has traditionally focused on the wrong metrics.
"Currently, we track the number of policies, how much premium is collected every year. We really do not track the number of lives covered or the total sum insured," Seth explained.
This distinction is crucial; a high volume of policies sold or a rise in premium collections does not automatically mean that the citizens or businesses are adequately protected against financial risks. The regulator is now signaling a strategic shift toward measuring "effective coverage"—ensuring that the insurance held is sufficient to actually cover the loss.
Digital Transformation: The Path to 30 Per Cent
To bridge this gap, the IRDAI is looking toward technology to make insurance more accessible and affordable. Seth pointed to the Account Aggregator (AA) framework as a game-changer. By allowing insurers to access financial information with the customer's consent, the cost of providing services can be significantly reduced.
Lessons from UPI
The Chairman referenced the massive success of the Unified Payments Interface (UPI), suggesting that the insurance sector needs to generate a similar level of demand for its digital services. He emphasized that while digital infrastructure is vital, it is not the end goal.
According to Seth, the industry must prioritize the creation of insurance products and services specifically designed around the actual needs of individuals and small businesses, rather than focusing solely on the technical side of digital delivery.
The Role of Human Advice in a Digital Age
Despite the heavy push toward digitalization, the IRDAI chief clarified that human intermediaries are not becoming obsolete. He stressed that insurance agents will continue to play a vital advisory role, helping customers navigate complex options and choose the products that best suit their specific needs.
However, for the industry to penetrate smaller cities and reach beyond high-income groups, digital platforms are non-negotiable. "Digital is the way to move forward," Seth asserted, noting that the combination of digital tools and the account aggregator infrastructure will make insurance far more affordable for the average Indian.