After years of handwringing, the Insurance Regulatory and Development Authority has finally rolled out a critical reform—Bima Sugam. It’s claimed to be the world’s first platform bringing insurers, agents, brokers, banks, and aggregators together, making buying, renewing, and claiming all policies easier.
Touted as the game-changer, it offers a unique, lifetime digital insurance ID, Bima Pehchaan, which links individuals’ various policies under a secure, consent-based framework, eliminating complex paperwork and facilitating claim settlements.
The digital platform, backed by the regulator, aims to empower and protect policyholders, and increase reach and affordability to achieve the vision of insurance for all by 2047. Though India was the world’s 10th largest insurance market in 2021, and is on course to be the sixth largest by 2032, insurance penetration—at 3.7 percent in 2023-24—remains well below the global average of 6-7 percent.
Although IRDAI has pitched Bima Sugam as the ‘UPI moment’ for insurance, there are significant challenges to mind. While consumers have the option of comparing and buying policies online even now, a major stumbling block is the confusion caused by intricate clauses and jargon.
Policyholders often do not completely understand the coverage terms, ending up with messy claim settlements. This is why consumers rely on agents to assist them through the entire settlement process. The downside, though, is that agents often push specific products based on commission or personal preference. They pocket an estimated 15-40 percent of the first-year premium as commission, depending on the product and insurer, which inflates premiums in the long term. While buying online eliminates this cost and prevents misselling, not all customers are comfortable or satisfied with claim settlement without agents’ assistance. It will be interesting to see how Bima Sugam fills the void, particularly in rural areas, where users may need more handholding.
Given India’s low premiums-to-GDP ratio, Bima Sugam comes through as a serious reform intended to democratise insurance, empower policyholders, and simplify processes. However, IRDAI must first ensure strict data-sharing protocols and end-to-end protection of sensitive financial data across the entire value chain. The regulator should also place a strong emphasis on protecting privacy and maintaining the integrity of personal information at every stage, whether while collecting, storing, or sharing personally identifiable data. The reform needs trust to make it work.