1. The digital transformation in INDIAN Insurance MARKET:
Here in India, the insurance sector has taken longer period to embrace digital transformation than many other sectors. This is mainly for the chosen preference for personal relationships when dealing with insurance placements and the complexity of the insurance purchase processes, particularly when it comes to pension, ULIP and annuity products(in the life sector) with high-end values or Project & Liability insurance coverages (in non-life sector) for their discreet specific underwriting requirements.
Fueled by FinTech investments and Insurtech startups, Indian insurance now become a hothouse of digital innovation. In response, insurers started embracing various changes and rethinking on their business models to move towards a compliant, secure and digitally-enabled operating model to enhance customer, employee, partner and other stakeholder experiences. Newly invented digital tools and capabilities help insurers to streamline new product developments, digital experiences and the transformation of key functions — from positioning, marketing, distribution, underwriting, investigations and claims to finance and accounting.
The facets of insuretech are depicted below:
Digitalization is getting a lot of momentum in the Indian industries and the insurance sector is obviously emerging out to be one of the biggest beneficiaries – in regard to enhancing its footprint, selling of new policies, settlement of claims and creating digital intermediaries – as technology is playing the crucial role in insurance outreach. Intermediaries and agents are the integral part of the business to help reach insurance penetrate into uninsured areas but in majority of the cases insuretech is being used as the mean of distribution for existing products to new customers. Policyholders are now provided with an online platform to get their policy immediately. Chatbots, allowing the customers to open an online conversation window to raise queries, are getting immensely popular amongst the proposers & policy-holders of insurance industry.
Now-a-days technology offers the efficiencies needed to provide the service to consumers’ demand while enabling carriers to streamline their processes and initiate, tailor & scale insurers’ product offerings. But insuretech doesn’t just mean offering insurance products more speedily online – companies involving themselves in insuretech have since exploded to include a vast, evolving system of interconnected services and product offerings.
Factors which will contribute to growth of Insuretech in India are now given as below:
Insuretech partnership expanded significantly during 2020 at the backdrop of lockdown (arising out of pandemic Covid-19) on the digital platform, that emerged as the dire need of common people in the entire global insurance market. Insuretech Partnerships flourished globally till 2020 is represented below: –
From the above figure, it is evident that every year, the number of Insurtech Partnerships is always increasing. As per the expectation between 2015 to 2023, the global market of insuretech is expected to grow 41% annually. There are lots of regulation issues exist in insurance sectors, and many established insurers are intended to be reluctant towards those. Moreover, these set-ups require the thorough experience of the exposures of traditional insurers’ that they acquired while handling prudent underwriting &/or to manage the ghastly disasters of catastrophic risks.
Fintech is widely accepted in the entire financial landscape. India adapted to Fintech much faster than other countries, making it a fertile ground for Insuretech to mature and grow within India. A subsector of Fintech, Insuretech is a term used to refer to technology that is designed to improve and enhance operations of insurance players. With the backdrop of Covid-19, more and more people are resorted to digital modes of buying insurance in India. This pandemic has invariably changed how people think about insurance – for taking initiative to avail mainly the health & life insurance policies.
A digital revolution is gently happening in India. The share of premium received through an online channel in India is still small, but it is rising. It is proved through some of the surveys that consumers are using more and more internet for searching appropriate products, as internet has become a trusted source of advice for them. So, as a glaring example, it is found that adopting digital technology has already made some insurers as the market leaders.
- SITUATION OF INDIAN INSURANCE MARKET PENETRATION:
We have witnessed that India has become the world’s fastest-growing major economy, but insurance penetration stands continually low in Indian market in comparison to other developed markets. In FY2021, India’s life insurance penetration stood at around 3%, while the non-life insurance penetration was hovering around at 1%.
So, there is enormous prospect of insurance penetration in India considering the vast untapped market and it experienced increase in momentum in recent years moving to 4.2% in 2021 from 3.76% in FY20.
The rapid economic expansion, supported by digital infrastructure and innovation will play a defining role to make the insurance market in India as one of the largest across the globe.
Indian Insurance market stands at $131 Bn as of FY22. The Indian insurance industry grew at a CAGR of 17% over the last two decades and is expected to continue its commendable growth trajectory in the future years. The India Insurtech Association (IIA) collaborated with Boston Consulting Group (BCG) released the second edition of their Insuretech Report (Captioned – ‘India Insurtech Landscape and Trends Report’), which identifies dominating trends and key player’s views on the Indian Insurtech Sector. According to this report, rapid funding in insuretech has continued across the globe (and strong momentum in India is also observed). Global funding in insuretech has grown 5.6 times in the last 5 years, from $2.5 billion in 2017 to $14 billion in 2021, with growth continuing even during the pandemic period. Insuretech funding in India has also increased from $290 million in 2020 to $800 million in 2021. Experts believe insuretech in India is well-positioned to cater to the nuanced needs of customers and also at the point of exponential growth.
Insurers who fully embrace digital transformation can achieve significant competitive advantages by meeting tomorrow’s customer needs — driving operational agility to respond to changing marketplace expectations. To succeed, insurers must understand what’s possible and take decisive action to deliver value now and ignite their long-term growth.Insurers need to ensure that their customers have secure, effortless access to services online. More people than ever before are buying insurance on their computers and mobile devices.
Considering this increasing trend of on-line insurance sale, the dire needs are: –
1. To maximize customer inclusion and accessibility.
2. Building the trust amongst the customers/proposers/ insured
3. Protection against online fraud cases.
4. Ensure the delivery of asecureyeteffortless digital customer experience.
5. Absolute compliance of AML Act, KYC & other requirements.
6. Defend against the reputational risk
7. Application of remote biometric faceauthentication.
- DIRE NEED OF SAFE-GUARDS IN INDIAN ON-LINE INSURANCE SALE:
Various aspects of specific needs & safe-guards may be enumerated as per the following details: –
A. Improving access to online-insurance portals:
How does the insurer will ensure that the right person is able to access their account instantly & smoothly, without slightest frustration?
Thefrustrationcanbecausedinmanyways – Passwordscanbeforgotten,emailaccountsmay have been deleted, recovery emailaddressesorsecurityquestionsforgottenandphonenumberschanged.
Biometric face authentication removes the need for passwords or other online security methods that can be for gotten overtime.
A new customer might verify their face against a trusted document (such as a driver’s license) when they open their account.Insuredmayuseasimplefacescanontheirmobiledeviceorcomputertoauthenticatethemselveswhenevertheyreturntotheportal.
Alternatively, existing customers can be asked to verify themselves using a trusted document when they next access the portal tocompletea sensitivetransaction.Futureauthentication isthen completed simply and securely using a facescanlastingfor fewseconds. This means that whether insured visit insurer’s online portal once a month, once a year or once every five years, their face will ensure simple, secure access without any fussor hassle.This delivers the highest levels of security,protecting both the insurer and their customers, from online fraud and identity theft.
- Enabling insurerstobuild trustduring online sale:
All alongthe insurerswinandretaincustomersthroughtrust.Trustisthe fundamentaltothelong-termsuccessofanyinsurancebrand. High-value pensions and annuities typicallyrequire years ofcontributionsbefore theyare accessedanddrawnupon.Customersmustfeelconfidentgivingtheirmoneytoaninstitution,whom theytrusttohelpthe customers toachievefinancialsecurity. If these insurers’ customers trust the Company’s brand, they’ll showtheirloyaltybyaddingtotheirportfolioofservices ,recommendingthat insuranceorganizationtotheir friendsandfamily in future course.
C. Stringent enforcement of safeguarding features for avoidingmoneylaundering:
This might be a stiff challenge all along. Making it simple forcustomerstopurchaseaninsurancepolicyneedstobebalancedwith critical checkstoensurethatthepolicyisnotbeingusedformoney-laundering purposes, in any way.Criminalnetworks, present in existence,useinsurancepoliciesto‘launder’ill-begottenfinancialgainsbydepositinglargesumsthattheythendrawdown,turningfraudulentmoneyintocleanmoney.
Tocombatthis,regulatedinsurersandother financial institutions have to comply with anti-moneylaundering(AML)regulationswhenthey deal with their onboardcustomers.
D. Reducing the risk of account (of on-line customers)hacking by fraud-stars:
One of the downsides of infrequentinteraction between insureds and insurers: the customer forgettingtheirsecuritycredentialstoaccesstheiraccountonline.
Butthere’sanotherpotentialdownsideto infrequent contact:thecustomernotnoticingwhenfraudhasbeencommittedagainsttheiraccount. Pensionandannuityfundsareatargetforcriminalsbecauseofthehighvalueoftheircontents. By impersonating the policy holder, fraudsterscantakeoveranaccountandgainaccesstolargeamounts of money. Because the true accountholdermayonlychecktheiraccountonceayearorless,accounttakeoverfraudcouldgoundetected and unreportedfor sometime. Itisthereforeimperativeforinsurerstotightenupdefensesaroundpensionandannuities.
Biometric face authentication helps to preventaccount takeover fraud. A criminal can stealknowledge-based security information, such aspasswordsandmother’smaidennames.Theycan
dupepeopleintorevealingPINsandspecialwords. Once they have that data, they can change phone numbers so that an individual’s mobile device can no longer be trusted.
Criminalscannotstealaface,however,theycancopyaface,usingphotographsorvideosormasks.
So,insurers need to confirm that an online individualcompletingabiometricfaceauthenticationis
the right person, a real person and that he/she is authenticating right now. This ensures that the person logging into their insurance account is indeed the verified policyholder.
- WHILE SUMMING UP:
Most of the insuretech companies focus on the front-end customer experience, reducing existing frictions in traditional insurance transactions. The time it takes to fill out an application/proposal and receive a quote is a classic example towards this. Side-by-side it also seeks to streamline and enhance back-end functions, such as how to assess and price risk, perform loss control, and claims’ management. The claims process is particularly well suited for technological transformation. Insurers traditionally have hired adjusters to determine the extent of their liability for a loss, damage, or injury to the claimant and come up with a settlement. Today, new approaches aid the claims process, often in combination with traditional ones. Immediate and hassle-free claim settlement is the priority service of insurers – as it sets the benchmarking & branding of the insurers in the market for their performances – as such this initiative attracts the customers to come more within the purview of insurance net. At the same time, it excludes fraudulent claims – e.g., auto insurance claimants can submit photos via app immediately after an accident. Insurers also are using machine learning, record of pre-acceptance inspection reports and numerous publicly available datasets to detect and restrain potentially fraudulent claims to avoid their colossal blood-shedding, to ensure insurers’ profitability.
As digitalization helps improve assessing and processing proposals and claims affairs, new insurance products are being developed and traditional products can be handled differently. One emerging global approach – enabled by the Intersection of Telecommunications and big data known as “telematics” – is the Usage-Based Insurance (UBI) priced according to drivers’ own behavioral data in the field of vehicle insurance. A more recent stage in UBI’s evolution is pay-as-you-drive auto insurance by the mile, with monthly billing that varies based on how much a person drives. Advances in telematics and the Internet of Things (IoT) are increasing the quantity and range of the data that insurers will have at their disposal, in this Insuretech Regime.
Moreover, although digitalization is creating opportunities and challenges for insurance companies. But it can be hard to cut through the noise – to the insurers to decide what to measure, what to automate, what the next commercial opportunities might be, and what technologies to employ to make the most of them. The technology the insurers develop is shaped by talking about their issues in conversations they have with their clients every day. Their consultants and technologists work side-by-side and this combination of domain knowledge, practical experience and cutting-edge technology development, all is required in this process. It means their clients must benefit from insurance-focused solutions built from the ground up and how their sophisticated algorithms reduce the frictional costs of insurance at every stage of the involved value chain. Insurers continue to develop for their clients next-generation technology in-house as well as partnering with promising start-ups and early-stage businesses. It’s about cutting through the hype and bringing clients the technology solutions that will transform their business in order to save money, work better and grow profitably.
