Page 50 - The Insurance Times May 2025

Digital Identity

Digital Identity and Inclusive Insurance: Breaking

Barriers to Access

Introduction The Promise of Digital Identity Systems
Access to insurance has long been a challenge for Digital identity systems offer a digital record of a person's
underserved and marginalized communities across the identity that can be verified online, often using biometric
globe. Factors such as lack of formal documentation, lim- or mobile-based authentication. These systems can be used
ited financial literacy, geographic isolation, and economic to:
vulnerability have historically excluded millions from the fi- Simplify Know Your Customer (KYC) compliance
nancial safety net that insurance provides.
Enable mobile-first registration and premium payments
Facilitate claim processing through verified digital
However, in the digital age, new opportunities are emerging
to bridge this gap. One such opportunity lies in the develop- records
ment and implementation of robust digital identity systems.
A digital identity becomes a gateway to accessing not only
insurance but also other financial services such as credit,
Digital identity refers to the use of technology to authenti-
savings, and pensions. For insurers, it reduces onboarding
cate and verify a person's identity online. When effectively
costs, expands market reach, and minimizes fraud.
integrated with the insurance ecosystem, digital identity can
play a transformative role in enabling inclusive insurance-
ensuring that individuals who were once invisible to finan- India's Aadhaar: A Case in Point
cial institutions can now access affordable and relevant in- India's Aadhaar program is one of the world's most ambi-
surance products. tious digital identity systems. With over 1.3 billion users,
Aadhaar provides each citizen with a unique 12-digit iden-
The Problem of Access in Traditional In- tity number linked to biometric and demographic data.
Aadhaar authentication is now used widely for e-KYC in
surance Models
banking and insurance sectors.
Traditional insurance models often depend on physical docu-
mentation-birth certificates, government IDs, proof of resi- Insurers in India use Aadhaar to streamline the issuance of
dence, and income statements. These requirements, while microinsurance policies. The Pradhan Mantri Jeevan Jyoti
necessary for fraud prevention and compliance, create sig- Bima Yojana (PMJJBY) and the Pradhan Mantri Suraksha
nificant barriers for the informal workforce, migrants, and Bima Yojana (PMSBY), which offer life and accident insur-
people in remote areas who may lack access to such docu- ance respectively at nominal premiums, have been imple-
mentation. mented using Aadhaar-linked bank accounts.

Moreover, manual processes are typically expensive, time- These schemes have already enrolled over 400 million
consuming, and inefficient. For insurers, onboarding such people, many of whom are first-time insurance users. The
customers often appears unviable, both in terms of cost and use of Aadhaar not only simplifies enrolment but also speeds
operational feasibility. As a result, millions remain excluded up claims processing, making insurance more attractive and
from basic health, life, and agricultural insurance. accessible.

46 May 2025 The Insurance Times