Best governance practices through enhanced processes can help in achieving financial inclusion in Insurance

Achieving Financial Inclusion in Insurance

Financial Inclusion is in simple words the availability of financial services to everyone and has been the goal of our government post-independence. While the initial initiatives were around making banking services available, significant steps have been made to use the banking channel to offer life insurance in the last few years. Insurance has played a significant role in enhancing financial inclusion in India and is now included in the measurement of financial inclusion. Technology & simple yet easy processes have made and can continue to make a dramatic difference to enhance life insurance penetration. It is an interesting area and warrants a discussion. 

In another fortnight, banks across the country who have participated in Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) will execute the 7th year of its operation. PMJJBY offers a life cover of Rs 2 lakhs of sum assured at a nominal premium of Rs 330/- to anyone who has a bank account and is in the age group of 18-50. It may not be a lot but a sum of 2 lakhs would give a return of approximately Rs 1000 p.m. which can supplement the earnings of the dependants. 

Basic Process

The key processes to reckon with include customer onboarding which happens across the year, the renewal which happens on June 1st, and claims which are filed on the loss of life by the nominee. As banks are the primary distribution channel, the front all of these. They collect premiums through their various touchpoints along with a proposal along with an auto-debit mandate and have the capability of giving a Certificate of Insurance to the customer across the table.

Based on the inputs received from the bank, the insurer also can send the certificate of insurance. The bank sends renewal reminders through SMS to its customers and debits their accounts on June 1st to ensure continuous coverage. Claims forms are accepted at the branch and shared with the insurer for processing and have a high settlement ratio of near 100% as only fraudulent claims get repudiated.  

Process Improvements

Several enhancements have been done to the above process. Some of them include pro-rated quarterly premium, lien period of 45 days for new policies, digital customer onboarding through mobile & internet banking, and process to ensure that claims are paid by only one insurer. Further, the claims processing has seen significant improvements basis close coordination & integration between banks & insurance companies over time on account of a learning curve effect. Recent improvements include allowing insurers to offer this product to customers directly.  

Innovation & thinking out of the box, Financial Inclusion

They hold the key to further improvements as the existing process is lucid. While this is a highly regulated product and the product structure & the process is tightly governed by the Department of Financial Services, Financial Inclusion need not get restricted to one product in the life insurance industry. They can be offered by insurers through existing and new products that they can develop. 

Channel, Financial Inclusion

Financial inclusion can be driven through channels beyond banks & postal services. India is seeing rapid advances in the adoption of digital means of doing business across geographies. Necessity has driven channel innovation in the last year impacted by a pandemic. This opens several vistas through which life insurance could be sold in the future. A seamless process developed by any product or service which reaches out to the masses is a recipe for success and may very well lead the life insurance penetration in the country.

Bite-Size, Financial Inclusion

Shampoo sachets may have caused a revolution in the FMCG industry and were quickly adopted by tea, coffee, toothpaste, snacks, soft drinks, nutrition drinks, and many more. They have made hitherto unaffordable products available to the bottom of the pyramid customer. This has particularly been successful in small retail shops which the producers have grown to nurture. Bite-sized life insurance covers could very well do the same with shorter tenure, lower sum assured, and lower premium, and play a big role in building financial inclusion. 


The Insurance Regulatory & Development Authority of India launched the regulatory sandbox in 2019. The objective is to strike a balance between orderly development of the insurance sector and protection of interests of the policyholder, whilst driving innovation. The categories allowed include distribution, products, underwriting, policy & claims servicing, and any other that is recognized by the regulator. With several InsureTech firms, Brokers, Corporate agents & Insurance companies treading the path of innovation, we can expect exciting processes to emerge soon.  

With the use of Artificial Intelligence and machine learning gaining prominence in the industry, Process improvements will cut across barriers and play a role not only in servicing customers but also in the sales & distribution journey. If each one of the 135-crore people of India must get insured, someone needs to keep asking the tough questions. 

“If you do not know how to ask the right question, you discover nothing.”

W. Edwards Deming


The article is written by Sunder Natrajan, Chief Compliance & Risk Officer, IndiaFirst Life Insurance Company.

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