The Insurance Regulatory and Development Authority of India (IRDAI) floated proposals in 2024 to create digital public infrastructure for insurance distribution through a unified portal. To be called Bima Sugam, it is envisioned as the equivalent of the Unified Payments Interface (UPI) for insurance. It aims to create a one-stop digital marketplace where policyholders can compare, purchase, renew, port, and raise claims or grievances — all in one place.
IRDAI's rationale is to make insurance more accessible, transparent, affordable, and inclusive, especially in underserved and rural areas. But introducing a direct selling or marketplace model inevitably raises trade-offs — particularly when compared to traditional agent-based distribution, especially in the light of new GST changes. Let's examine the pros and cons of direct digital distribution vs agents, and assess how buyers, companies, agents, and government may gain or lose.
Direct Marketplace Model (e.g. Bima Sugam)
Pros | Cons and Risks |
| Digital channels reduce or eliminate some or all intermediary commissions or markups, saving costs for insurers and customers. | Many rural or lower-income populations may lack internet/smartphone access, or be uncomfortable with digital apps, enhancing the digital divide. |
| Customers can transparently compare plans, features, and premiums in real time. | Insurance is a product that often requires explanation and reassurance, losing agents’ human touch can lead to loss of trust. |
| With greater mobile penetration, digital channels can reach remote, underserved populations, which agents may not cover profitably. | Without human vetting, mis-declaration or fraud risk might rise. |
| Digital portals offer standardization & uniform UI for all insurers, potentially leveling the playing field. | Insurers may end up competing only on price, with less room for differentiated advice or customization. |
| A central platform can enforce compliance, disclosures, anti-fraud checks, and KYC norms more strictly, offering consumers more protection. | Agents may feel displaced or marginalized, leading to pushback. |
| With e-KYC, automated underwriting, digital signatures, the customer onboarding and renewal journey is shorter. | System downtime, cybersecurity risks, data privacy, and integration issues can erode consumer experience and trust. |
| The portal can host plug-in services, APIs, comparison modules, etc, offering continuous innovation. | Oversight of algorithms, fair treatment, consumer redress mechanisms are complex and evolving. |
Agent-Based (Traditional) Distribution
Pros | Cons and Risks |
| Agents can guide buyer choice, explain policy terms, and help with claims, fostering long-term relationships. | Layers of commissions inflate cost structure and premium loading, with the burden ultimately falling on customers. |
| In off-grid or remote areas, agents are the human face of insurance. Further, in a multi-lingual country like India, local agents are the ones who can explain insurance in people's own language. | Agents may push inappropriate products for the sake of higher commissions, not for customer fit. |
| Agents can bundle products, cross-sell add-ons, customize solutions, that people may find difficult doing by themselves online. | Agents dislike travelling to low-margin or remote geographies; also, many agents drop out soon, leading to high churn. |
| Agents double up as market intelligence, relaying ground realities, complaints, and customer needs back to insurers. | Agent training, competence, ethics, accountability vary widely. |
| Primary or secondary income from commissions drives people to become agents, improving regional coverage. | Slower processes / paperwork burden — manual underwriting, documentation, follow-ups slow down issuance and claims. |
Stakeholder Impact: Consumers
Benefits | Challenges |
| Single-point access to multiple insurers and plans in one portal. | Digital literacy barriers may exclude some. |
| Lower cost or more discounts due to lower distribution overhead. | Lack of human advice may leave customers confused (and cause them to bot buy insurance at all). |
| Faster onboarding and service, less paperwork. | Potential for algorithmic opacity or hidden biases in recommending plans. |
| Greater transparency and comparison. | Platform glitches or cybersecurity failures can lead to trust issues. |
Stakeholder Impact: Insurers
Benefits | Challenges |
| Lower acquisition costs leading to improved margins and volumes. | Compression of margins via price competition. |
| Access to new market segments. | Need to invest heavily in technology, cybersecurity, API integrations. |
| Better data analytics from portal interactions, enabling product innovation and risk pricing. | Potential conflict with agents and backlash. |
| More efficient claims handling through automation. | Dependence on platform operator’s governance, uptime, policies. |
| Easier to deploy niche products like microinsurance or parametric products. | Risk of commoditization leading to loss of brand differentiation. |
Stakeholder Impact: Agents
Benefits | Challenges |
| Agents can adapt by becoming service agents, customer support, or onboarding facilitators rather than pure sellers. | Reduction in volume and commissions, and potential/eventual loss of employment. |
| They can focus on advisory roles for high-value clients., who may seek personalised insurance products outside the standard fare. | Pressure to transform skills to digital or advisory skills, which may have a steep learning curve. |
Stakeholder Impact: Government & Regulator
Benefits | Challenges |
| Advances higher insurance penetration, more inclusive coverage. | Burden of upfront investment and governance of the platform. |
| Better oversight, data transparency, fraud control, regulatory enforcement. | Potential regulatory arbitrage or platform dominance issues. |
| Lower social protection burden due to better risk pooling. | Public backlash if platform errors, outages, or unfair practices occur, e.g. launch of USA's HealthCare.gov. |
| Digital infrastructure becomes part of national stack, just like UPI. | Disruption of existing agents’ livelihoods leading to political & social pressure. |
| Progress towards stated goal of “Insurance for All by 2047” | Ensuring equitable access, data privacy, cybersecurity across many users. |
The Way Forward
The proposal to digitalize insurance distribution through portals like Bima Sugam is visionary: it promises to democratize insurance, reduce frictions, reach the last mile, and modernize oversight, the last being the primary incentive for IRDAI. Nevertheless, given a large customer base still uncomfortable with purely online transactions, an option to interact with an advisor online will become inevitable. Success will depend on a hybrid approach, where both on-ground agents and online portals coexist.
To maximize benefits to all stakeholders:
- Digital portals must support assisted modes (call centers, grahak kendras) for low-digital or rural users.
- Regular, multi-lingual consumer education and insurance literacy campaigns are necessary.
- Agents should be integrated as facilitators rather than eliminated.
- Governance, transparency, algorithmic fairness, and data protection must be enshrined, preferably by law.
- Pilots, sandboxes, and a phased rollout (with feedback loops to fix practical issues) will help smoothen customer onboarding.
The 2013 rollout of HealthCare.gov under Obamacare serves as a cautionary tale for Bima Sugam and other Indian plans. The site suffered from critical tech failures: crashing under high user traffic, mis-quoting plan prices, corrupted data in enrollment forms, identity verification failures, and consequent delays, undermining public trust, slowing enrollments, and inflating rollout costs.
Set against this, India's success in not only launching the Unified Payments Interface, but also ensuring its safety and integrity on one hand, and expanding its reach to near-universal coverage today is an inspirational story. To transform India’s path toward full inclusive insurance coverage, digital infrastructure models must be carefully designed, incorporating all stakeholders voices.
Keywords: digital insurance marketplace, Bima Sugam, inclusive insurance distribution, insurance direct selling model, agent vs direct channel, IRDAI distribution reform, insurance for all, microinsurance digital platforms, insurance digital inclusion, insurance agents role
