Financial literacy is the missing piece in insurance penetration: Rajiv Gupta, PB Fintech

“Insurance still gets sold and not bought because of trust deficit,” said Rajiv Gupta, President, PB Fintech, in his special address on “Trust as the Real Currency & Finance as a Force for Nation-Building” at Pitch BFSI Summit held in Mumbai. 

“Because insurance is one product which directly doesn’t give you a benefit immediately. A benefit is bestowed to you when an event takes place. If you buy a health insurance policy, till such time you are hospitalized, you don’t get the benefit. Similarly, when you buy a term insurance policy, till something happens to the person, you don’t get the benefit.

“When you opened your first bank account or bought your first insurance policy or applied for your first loan, what really mattered? Is it the interest rate? I don’t think so, right? It was the trust that your money will be safe, you know, in the bank in which you deposited the money. It is the trust that when you have a claim, your insurance company will honour that claim,” he said.

Gupta noted that despite growth in financial services, insurance penetration continues to face hurdles.

“Why does insurance even today get sold and not bought? Because across the country there is a huge trust deficit when it comes to buying insurance. Because insurance is one product which directly doesn’t give you a benefit immediately. A benefit is bestowed to you when an event takes place.” 

He pointed out that PolicyBazaar spends ₹400 crore annually on television advertising, yet penetration remains “lower single digit number.” For him, financial literacy is the missing piece. “Unless every nook and corner of this country is covered in the local lingual language in which people understand what is financial literacy, what is banking, why buying a health insurance plan is important, why creating an income plan for yourself is important… insurance penetration will not move.”

He warned that the challenge extends beyond literacy, especially with India’s demographic shift. “India has 150 crore people today… 60-70 crore people who belong to middle class and the lower middle class who neither fall under the poverty line nor are rich. While BFSI has played a significant role, this segment, for some reason, has still been left out.” Looking ahead, he cautioned about the looming impact of ageing. 

“Today out of 150 crore people, 12-15 crore people are senior citizens. 25 years from now, this number will be 70-80 crore… 80% of these senior citizens don’t have an income plan, don’t have a health insurance plan. Imagine, if today’s 40-year-olds who are going to be tomorrow’s senior citizens are not educated… the social impact this will create on the country,” he said. 

Gupta acknowledged positive policy steps such as the government’s decision to remove GST on insurance. “That’s also winning trust. At the end of the day, by conveying that it is nil GST, there is a positive message which has gone into the ecosystem. Not that tomorrow onwards the sales will double. But this is one key factor for people to know that this is not a luxury, this is a necessity and every human being should have this.”

He recalled how PolicyBazaar had to win consumer confidence step by step. “When we started off, I remember in 2008, we were only generating leads… out of 100 people who connected with us, maybe one or two people bought a policy and 98 would just understand and go back because they didn’t trust us. That scenario has changed and now we are at a higher double-digit number when it comes to conversion.” 

He added, “We started off as a 1 crore premium way back in 2008. Last year, we ended with 25,000 crores of premium. That has only happened not because we have improved technology… but because our commitment towards honouring claims, our commitment towards service has helped us to build the trust and confidence.”

The importance of empathy in financial services, he said, cannot be overstated. “Like Warren Buffet once said, it takes 20 years to build reputation and 5 minutes to ruin it. All your hidden charges, rejection of a genuine claim, not paying your deposit on the renewal date… can break trust in people, can create hundreds of doubts.” Referring to small borrowers and farmers, he said, “Not that you should give the money free of cost, but situations will have to be handled carefully and very sensitively.”

He urged financial institutions and fintechs to innovate responsibly. “In my opinion, innovate, but innovate with an intent. Just don’t innovate for the sake of innovating. Digitize with dignity. Grow, grow with a purpose. The purpose should be what difference am I going to make to this country.”

Summing up his remarks, Gupta said, “Trust is foundation, nation building is a goal. Finance is certainly the bridge between the two. I think beyond transactions, we should all measure lives impacted. When we nurture that trust finance becomes more than transactions, it becomes a way to build a nation.”