The Economic Survey of India has shed light on the rise of the country’s “missing middle” population who are not having access to formalised social security or insurance products. The Economic Survey has called upon the insurance industry to utilise technology efficiently to decrease costs & widen access.
According to the Economic Survey, there are many government backed welfare schemes to support the poorest% of households and that private insurance products generally do well to support higher income groups, however, the working population of India makes up a large “missing middle” that has not been adequately protected with health & life insurance coverage making them at risk of a financial crisis when faced with either a medical emergency or permanent loss of income.
The survey found that middle-income households have generally avoided opting for insurance due to high premiums, low levels of awareness about insurance products, and lack of efficiency in the administration of these products. The survey suggested that addressing these gaps could be accomplished by utilising technology more extensively such as through the use of digital platforms, data analytics, and artificial intelligence to reduce administrative costs and better assess risk.
The survey mentioned that innovations in technology, including paperless onboarding, automated claims processing and data-driven underwriting, could establish lower prices for insurance products thereby increasing access to them and making them more affordable. The survey also suggests that insurtech firms can partner with traditional insurance companies to broaden the last mile reach of insurance products in semi-urban and rural areas.
Additionally, the report highlighted that the effective use of technology could enable insurers to develop more customised products that would be able to better satisfy the requirements of informal workers; people who work in the gig economy; and small business owners (i.e., the “Missing Middle”; in other words, they are economically vulnerable).
Along those lines, the Economic Survey reiterated the need for regulatory support in fostering innovation whilst at the same time protecting consumers. The Survey indicated that a well-balanced regulatory framework is necessary to allow insurance companies to experiment with new technologies without increasing the risk to policyholders.
The survey thus concluded that insurance companies developing affordable, technology-enabled insurance solutions to address the Missing Middle can enhance financial resilience for households in India, and decrease the cost of public finance burdens over the long term.