Why Emerging Markets Need Experiential Insurance — And Why the Industry Isn't Ready to Deliver It

India is the 10th largest insurance market in the world. Its insurance industry has grown at double-digit rates for years. Premiums rose from ₹7.8 lakh crore in FY2020 to ₹11.2 lakh crore in FY2024.

And yet, insurance penetration has declined. From 4% to 3.7% of GDP. Life insurance penetration actually fell from 3.2% in 2021-22 to 2.7% today. Non-life remains stubbornly at 1%.

We are selling more insurance than ever. And reaching fewer people proportionally.

This paradox deserves more serious attention than it receives.

The problem isn't distribution. It's trust.

In FY2024-25, Indian insurers processed over 11 crore general and health insurance claims. In the same period, 2,57,790 policyholder grievances were logged on the Bima Bharosa portal. Complaints categorised under Unfair Business Practices in life insurance rose to over 22% of all grievances — up from 19% the previous year.

Behind these numbers are real people. Customers who bought a policy on faith, paid premiums for years, and encountered something they didn't expect when it mattered most.

This is not primarily a financial literacy problem. It is an experience problem.

A customer who has never interacted with their policy — never seen a benefit activate, never received a communication that made their coverage feel real — is holding a document, not a product. Their relationship with insurance is theoretical until the moment of crisis. And that moment is a terrible time to discover what you actually bought.

What the data tells us about why people don't buy

According to Swiss Re Institute, 93% of India's natural catastrophe exposures are uninsured. The mortality protection gap alone stood at USD 40.4 billion in premium equivalent terms. 60% of HNI customers believe their ideal cover should be 10 times their salary — but only 30% actually hold such coverage.

The gap between knowing you need insurance and buying it is not primarily a price gap or an awareness gap. It is a confidence gap. People are not sure the product will do what it promises. And they have good reason to be uncertain.

Experiential models change this equation

In other industries, the answer to confidence gaps is experience. Test drives. Free trials. Sample before you subscribe. The customer experiences the value before full commitment.

Insurance has largely refused this logic. Products are complex, premiums are annual, and the benefit is invisible until a claim. The industry has instead doubled down on disclosure — more documents, more fine print, more digital journeys — as though the problem is information rather than experience.

But emerging market consumers, particularly in segments the industry most wants to reach — MSMEs, informal workers, first-time buyers — don't need more information. They need proof.

Experiential insurance models — where customers encounter a real benefit before or alongside their full commitment — fundamentally shift the trust equation. A small live cover. A triggered micro-benefit. A claim experience on a limited policy before renewal into a comprehensive one. These are not gimmicks. They are trust infrastructure.

What it actually requires

This is not easy. Experiential models require rethinking product design from the ground up — coverage that is modular, benefit-first, and executable in small units.

• They require underwriting logic that prices limited trial exposure rather than annual risk pools.

• They require measuring success not just by premium collected but by customer activation and trust built.

• They also require regulatory openness to innovation — which, to IRDAI's credit, is improving.

The use-and-file framework, the push toward needs-based selling, the focus on policyholder protection are all signals that the regulatory environment is ready for more imaginative product design.

What is missing is the industry's willingness to design for experience rather than for sale.

The opportunity is real

India's insurance market is projected to grow at 7.3% annually through 2029. The "Insurance for All by 2047" vision is ambitious and meaningful. But penetration targets will not be met by selling the same products through more channels.

The next phase of insurance growth in emerging markets will be built on trust. And trust, in any market, is built through experience.

The infrastructure exists. The willingness is there among consumers who genuinely want protection. What's missing is the courage to design insurance differently.

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Protector IQ works at the intersection of insurance product innovation, underwriting design, and emerging market distribution. Exploring collaborations with global MGAs, Insurers, insurtechs, and development finance organisations building the next chapter of insurance in India and emerging markets.