Exploring Bima Sugam: A Revolution in Indian Insurance | PwOnlyIAS 2023

Context: This article is based on an Editorial “Bima Sugam: Is it a ‘UPI moment’ for the insurance sector, and how will it benefit customers?” which was published in Indian Express. The Insurance Regulatory and Development Authority of India (IRDAI) claims that the proposed Bima Sugam is a “game changer” and a “UPI moment” for the insurance segment, with ambitions of becoming the largest online market for insurance products and services. It has now postponed the implementation to June 2024.

What is Bima Sugam?

• About: It is an online marketplace that will house all companies selling life and non-life insurance on a single platform.
  
• Aim: It aims to simplify the process of purchasing insurance for consumers.
• An Online Platform: Here customers can choose a suitable scheme from multiple options given by various companies. All insurance requirements will be met by it.
  • The service providers will be the technological partners for creating and running a platform to provide all the services in one place.
  • Identifying the right policy, buying it, settling the claims and renewals will be streamlined in an online process. The process will be mostly on the lines of demat accounts and online trading in the case of stock markets.
• Paperless Policy: This platform will help in the settlement of claims in a paperless manner on the basis of policy numbers.
• Budget Allocated: The overall budget for it has been hiked to Rs 200 crore from around Rs 85 crore.
• Ownership: Life insurance and general insurance companies will own a 47.5 percent stake each, while brokers and agent bodies will own 2.5 percent each.

Significance of the Bima Sugam Platform:

• Single Platform with various Options: It will enable them to identify a suitable scheme for the customers in a single platform. They have to spend time talking to agents and visiting the websites of different insurers to select a suitable scheme.
• Cost Effective: Commissions on policies are expected to come down, benefiting the customers. The cost of buying policies will come down.
• Single window for the Policyholders: The proposed platform would act as a single window for the policyholder to manage his/her insurance coverage.
• End-to-end Solutions Provider: It will provide end-to-end solutions for customers’ insurance needs i.e., purchase, service, and settlement in a seamless manner.
• Access of Data on real-time basis: It will facilitate insurance companies to access the validated and authentic data from various touch points on a real-time basis.
• Reduce Paperwork: The platform will interface for the intermediaries and agents to sell policies and provide services to policyholders, among others, and reduce paperwork.
• Faster Claims & Renewals: Settlement of claims and renewal of policies will also become faster as paperwork is reduced drastically, making it easier for the customers.
• An Electronic Marketplace Protocol: As per IRDAI, it would universalise and democratize insurance, which would enable and empower all insurance stakeholders across the insurance value chain.
  • This protocol will be connected with India Stack which is a set of application programming interfaces that allows governments, businesses, startups, etc. to utilize the unique digital infrastructure to enable seamless delivery of services.

Conclusion:

• The implementation of Bima Sugam may pose significant technological challenges, but it holds the potential to enhance insurance penetration in India.
• Despite 80% of consumers recognizing the crucial role of insurance in financial security, a staggering 94% remain inadequately covered. 
• As the insurance sector embraces innovation and technology, Bima Sugam could pave the way for a more inclusive and secure future for policyholders in the country.