Digital India Insurance: A Statutory Compensation Pool for Victims of Cyber-Financial Fraud, Modelled on Motor Third-Party Insurance

This working paper proposes Digital India Insurance, a statutory compensation pool for Indian citizens who lose money to cyber-financial fraud, including digital arrest scams, fake investment and trading apps, UPI and online banking fraud, and card fraud. India has moved its citizens onto digital public infrastructure through Digital India, Aadhaar, UPI, Jan Dhan and Direct Benefit Transfer. The paper argues that a State which promotes digital-first life at this scale takes on a corresponding duty to socialise the fraud risk that ordinary users cannot reasonably prevent. Reported losses on the National Cyber Crime Reporting Portal were ₹19,812.96 crore in 2025, while only a small fraction is ever restored to victims. The proposal adapts a model India already uses: compulsory third-party motor insurance and the Motor Vehicle Accident Fund under the Motor Vehicles Act, 1988. Under the proposed Digital India Insurance Pool (DIIP), banks, payment aggregators, fintech companies, telecom operators and digital platforms contribute on a risk-weighted basis. Verified victims are paid first within fixed timelines. The pool then recovers from the institutions whose failures enabled the fraud, using the "pay and recover" principle recognised in National Insurance Co. v. Swaran Singh (2004). Enhanced cover is proposed for senior citizens and victims of fraudsters impersonating public authorities. The paper draws on I4C and RBI data, social contract theory, Rawls, Beck and Calabresi, the Kautilyan restitution duty, and Indian case law including State Bank of India v. Pallabh Bhowmick (2025) and the Supreme Court's suo motu proceedings In Re: Victims of Digital Arrest Related to Forged Documents (2025–26). It compares the reimbursement and shared-responsibility models of the United Kingdom, Singapore and Australia, and closes with a schedule of proposed amendments to ten Indian statutes and two RBI instruments. Proposed by Adv. (Dr.) Prashant Mali, Cyber Law Consulting (Advocates & Attorneys), Mumbai.