Introduction:
Indian Life Insurance Industry is in midst of a profound digital transformation powered by artificial intelligence, machine learning, predictive analytics, mobile service enablers, the Insurance Industry is undergoing a change which will stay for years to come. Initiatives like Bima Sugam (IRDAI) DIVE (LIC) are just tip of the iceberg.
This article delves into the key aspects of the digital revolution sweeping through the Indian life insurance sector and its implications for insurers and policyholders alike.
Overview:
Change is constant;however, it was never so fast paced ever in history. We are witnessing unbelievable shifts in technology, workforce, customer expectations, market volatility, explosion in cybercrime and Indian Insurance sector is no exception. There is an urgent need for Insurers to transform their tech infrastructure and product and service models not just to bring in profitability but also to sustain and survive in the everchanging conditions.
Digital Imperative
Covid propelled contactless and straight through processing initiatives where human touch was minimal. Also lead to product innovation from protection centric to wellness-oriented products. It propelled the Digital transformation of Life insurance to new levels –The fusion of cutting-edge technologies with business processes has become a catalyst for innovation, efficiency, and sustained growth.
Key Initiatives in digital Life Insurance.
1. Digital Distribution channels
Although for Fiscal year 2022-23, only 0.88 percent (IRDAI Annual Report 2022-23) New business premium was sourced through Online Channel and Web aggregators, Online channels are evolving as the most preferred mode of purchasing insurance. Also, an Online customer may be well aware of his/her insurance needs. Currently there is a huge gap between demand and supply of Contactless Life Insurance Purchase.
As per McKinsey report (January 2021), “At the product level, more than 90 percent of multichannel insurers provide online access to their motor and household insurance products, but only about 40 percent do so for full health coverage—and a mere 11 percent for traditional or unit-linked life insurance. Just one of the players with life insurance products in its portfolio does not require face-to-face interaction for purchasing.”
There is urgent need for increased emphasis on sale through online channels, Mobiles, websites mobile apps and other digital platforms.
Even Traditional agents are being empowered with mobile apps and they are able to login and issue policy through their mobile in 10-15 minutes.
2. Omni channel Communication
Customers are expecting a seamless and integrated digital experience through multiple points of contacts, be it social media, websites, mobile apps, chatbots or email. As per 2019, McKinsey report, “one in two customers were “multi-access,” choosing to engage with carriers via multiple channels. These findings indicate that consumers want to not only engage with insurers via their preferred channel but switch between channels as they shop. In other words, they want an omnichannel experience.”
There is a lack of seamless Omnichannel service in insurance market today, but then it provides the insurers and opportunity to create disruption in this sector and provide top tier Cross Channel experiences.
3. Data Analytics
Using Predictive Data analytics and Machine Learning(ML) tools, Insurers can identify likelihood of future outcomes with historical data. This would help in better client retention, cross selling and fraud detection and thus leading to increased revenue to the Carriers.
Data analytics can be broadly categorised in the following categories-
· Risk Assessment and Underwriting-
Analysis of wide range of factors such as demographic data, medical history, lifestyle habits, and occupation help Life Insurance companies to assess risk more accurately.
Also advanced analytics techniques enable insurers to price policies more effectively and mitigate adverse selection by predicting Mortality and morbidity risks.
· Product Development and Pricing
Optimal pricing strategies if based on risk profiles, market trends, competitive landscape help insurers develop products which are attractive to customer and profitable to insurer.
· Fraud Detection and Prevention
Data analytics can help in identifying suspicious patterns and anomalies in claims data and help to detect fraudulent activities.
Further predictive modelling and machine learning algorithms help insurers to flag potentially fraudulent claims early, reducing financial losses.
· Customer Segmentation and Enhanced Customer Satisfaction
Insurers can tailor their marketing efforts, product offerings and distribution channels to effectively target specific customer segments and improving customer acquisition and retention.
By leveraging analytics, insurers can personalize their interactions with customers, streamline processes, and provide more responsive and efficient services, thereby enhancing the overall customer experience.
4. AI for underwriting and Claims
AI is revolutionising multiple domains of Insurance, Underwriting and Claims taking the lead.
· Underwriting
Better Risk Assessments, STP processing are enabling Policies being priced, distributed, underwritten, and issued almost real time. With Introduction of Predictive Underwriting, future risks can be predicted based on current data, leading to better pricing. AI also helps in eliminating human error.
· Claims
Though STP claims are still a far-fetched goal in Life Insurance, AI isbeing used to detect fraudulent claims and partial automation of claims process flow.
Life Predictive underwriting, AI can also predict future claims, helping Insurers to adjust theirreserves accordingly.
- Block chain for Cyber security and Transparency
Digital Explosion has led to largescale online data exposure and Cybercrime is currently the biggest threat to any industry.
Forging of documents for financial gain, theft of insured property, challenging scenario of proving liability are a few of the challenges faced by an insurance company. Conventional methods of addressing these challenges take a significant amount of time, money, and labour.
Technologies like Big Data, Blockchain, Smart Contract, etc. are prophesied to dramatically change the functioning of insurance sector and make lives of all parties involved, hassle free (Gatteschi et al).
Several industries in the global market have taken a technologically advanced step by adopting and implementing blockchain for the purpose of transparency and traceability. Blockchain technology provides a decentralized and open platform that allows the creation of a transparent, secure, and robust database (Lipsey et al).
Implementation of robust cybersecurity measures to protect sensitive customer data and ensure the integrity of digital transactions while ensuring transparency in all transactions is the most pertinent requirement of the industry and Block chain Technology can be one of the most suitable solutions.
6. Agile Methodologies
Agile Methodologies, though originated in software development is now increasingly being used in other industries including Life insurance.Many Carriers like ICICI Life, Canara HSBC or Insurance aggregators like Policy Bazar have embraced Agile methodologies in their day to day working.
Having an Agile Cross functional team, enables an insurer to accelerate its speed to market for new product launches, better risk management, enhanced Customer engagement and fostering innovation in a rapidly evolving market.
By embracing agile principles and practices, life insurance companies can become more agile, resilient, and customer-centric, positioning themselves for long-term success in the digital age.
Conclusion
In the era of ever evolving digital landscape, digital transformation is no more a matter of choice but dire necessity to businesses if they want to stay ahead to the curve and remain competitive and profitable.
By embracing a holistic approach, Insurers can unlock new levels of new levels of innovation, efficiency, and customer satisfaction.
Those who have onboarded the digital disruption bus early, have already started reaping the benefits.
Understanding the future, IRDAI has also come up with its innovative portal Bima Sugam- one-stop shop for all insurance related queries, policy purchase, claim settlement and insurance advisory.
