Fintech key to expanding insurance for India's 'missing middle': Govt

A senior finance ministry official highlighted fintech's crucial role in boosting India's low insurance penetration by offering personalised products to the 'missing middle' and moving from basic financial inclusion to financial empowerment for all.

Fintech firms can play a pivotal role in expanding India's insurance penetration by developing personalised products for the "missing middle"-- consumers who can afford insurance but lack suitable offerings--a senior government official, Abhijit Phukon, Economic Advisor, Department of Financial Services (DFS), Ministry of Finance, Government of India.

Expanding Insurance Penetration

Addressing the India International Fintech Festival on Friday, he noted that the country's insurance penetration of 4-5 per cent remains well below the global average; thus India has plenty of scope in the sector. "We need to come up with a lot of products, give choices to the consumers alongside, you know, creating awareness..." he said stressing, "...fintechs can play a greater role by designing... personalised products required for different customer segments..."

Phukon further added that fintech has a critical role in improving productivity, reducing costs and ensuring last-mile delivery of financial services as India targets becoming a USD 30 trillion economy.

From Financial Inclusion to Empowerment

Highlighting India's progress in financial inclusion, he said the country has led the world's largest financial inclusion programme. However, he noted that financial inclusion should go beyond opening bank accounts and focus on ensuring greater usage of these accounts while improving the financial well-being of account holders.

"We need to actually move from financial inclusion 1.0 to financial inclusion 2.0 -- from financial inclusion to financial well-being to financial empowerment," he said, noting Digital Public Infrastructure (DPI 1.0) is based on a certain thematic approach like interoperability, scale and speed.

Building a Future-Ready Ecosystem

Apart from this, Phukon stressed the need to democratise AI computing infrastructure, bridge technology skill gaps and strengthen industry-academia collaboration to build a future-ready workforce.

Collaborative Fraud Prevention

He further stressed that fraud prevention mechanisms should be built at the ecosystem level through shared services and common platforms, rather than by individual entities acting in isolation.

He advocated moving away from isolated, silo-based approaches to fraud prevention towards a more open and collaborative ecosystem model built on shared platforms and services.

He also stressed that while artificial intelligence is essential to strengthening fraud detection and prevention, its deployment must be accompanied by adequate safeguards and guardrails.

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