Abstract
Technology is making an impact in almost every industry including insurance. The use of information technology has a huge impact on the Indian insurance industry and the unthinkable has become doable now. Insurance industry has always been very conservative to adapt technology and insurance is one of the least innovative areas for consumer’s experience, but things have definitely changed in the last few years, especially in India. Around 10 years back, we were not even able to purchase insurance online, but today technology has become a major industry force. This transformation is giving huge advantages to the insured in terms of providing competitive premium and easy claim settlements. Insuretech no doubt is the next billion-dollar opportunity for insurers operating in India.
Technology has imposed a transformative effect on the insurance sector. Despite the fact that the general insurance business in India has been growing at a healthy rate of over 14 per cent from the last few years but its penetration level is just less than 1 per cent of India’s GDP. India continues to be a grossly underpenetrated market with a non-life penetration at one-third of the global average. In the financial year 2018-2019, gross direct premiums of non-life insurers reached Rs. 1.69 trillion (US$ 24.14 billion), showing a year-on-year growth rate of around 14%, but a clear issue of insurance penetration can be seen despite recent growth numbers. This is also true that from the last few years, Insuretech has provided new ways of selling insurance and has become a vital tool for increasing insurance penetration. Digitization is driving an unprecedented shift toward lower cost structures and greater agility in the insurance industry. Technology is ruling the insurance industry and many competitors have started working on “InsurTech” by exploring different ways to adopt technology, which is cost-effective, and improve the efficiency of the company.
Insuretech has started making insurance better, faster, simpler, cheaper, and more reliable through cloud-based insurance systems, artificial intelligence, and blockchain technology and with the internet of things, sensors feeding data into real-time risk management systems, and predictive claims models.
In this article, you will be able to know, how insuretech is helping in increasing insurance penetration through building new products and services and how insuretech has made insurance more and easily reachable to all sections of society. The broad objective of this article is to identify the new and evolving technology that enhances the performance of the company, helps in fraud detection and effective client servicing.
A digital revolution is quietly happening in India. The share of premium received through an online channel in India is still very small, but the same is rising. It is proved through some of the surveys that consumers are using more and more internet for research and that the internet has become a trusted source of advice for insurance. Digital technology has made some of the insurance companies as market leaders.
Digitalisation is getting a lot of momentum in the Indian industry and the insurance sector is 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 a crucial role in insurance outreach. Intermediaries and agents are an integral part of the business to help reach insurance penetrate into uninsured areas but in majority of the cases insuretech is being used as a mean of distribution for existing products to new customers, in addition, policyholders are now often provided with an online platform to get their policy easily. Chatbots are also getting popular among policyholders. It allows the customers to open an online conversation window to raise queries. Insuretech is having a direct impact on increasing insurance penetration but there is lot more potential yet to be realized particularly in the area of internet of things, blockchain technology etc.
Insurance penetration for any year is defined as the ratio of premium underwritten in a particular year to the GDP of that year. We have witnessed that India has become the world’s fastest-growing major economy, but insurance penetration stands continually low in Indian markets in comparison to other developed markets.
The Indian insurance market, which currently accounts for around 2% of the world’s total insurance premiums, is having a huge business opportunity due to low penetration and through effective use of different technologies, the penetration level may increase.
Due to some of the factors like young population, healthy savings and investment rates etc., the growth optimism is strong for a country like India. Around 33 general insurance companies are operating in India, and all are running in the race of digital disruption. Insurance companies keep working on market analysis for technologies and digitization for better communication with customers. The use of big data, artificial intelligence, and cloud computing is changing the nature of work and the structure of the economy. This shift started with companies such as Apple, Amazon, Netflix, Facebook, Google, Salesforce, and Uber, which are creating online structures that enable a wide range of digital activities. They have opened the doors to radical changes in how we work, socialize, create value in the economy, and compete for profits. Use of technology is changing digital behaviors and customer expectations as customer want quick policy, quick claims, quick renewals and instant services. Today’s generation is tech-savvy; they want everything on mobile app. Insurance companies are redefining their structure according to customer expectation. Recently, insurance companies are bombarded with a lot of technology in the market like Artificial Intelligence, Blockchain, Machine Learning, Predictive Modeling, IOT, Telematics, and Mobile Application etc. which all are useful for some or the other way in an insurance company. Companies started launching pilot survey for use of technology to check the efficiency of the technology before adopting it.
Insurance technology is undoubtedly playing an important role between customer and agents’ interactions. Most of the channels for delivering insurance products are getting digitized, thereby increasing efficiency and reducing turnaround time.
Most of the insurers are now giving advisory services related to risks and claims through their digital platforms. Insurers are increasingly using technology for delivering sales and services to their consumers in a simplified and seamless manner.
Moreover, the adoption of technologies has also simplified the otherwise complicated insurance products and services; thereby helping customers in making smart choices. The world is changing at a fast pace and understanding ever-evolving customer needs is imperative in serving effectively and efficiently.
Reasons for InsurTech in India
Rising Customer Expectations
The Revolution of e-commerce has forced insurers to think differently in order to meet the rising expectations of consumers who are demanding better, faster and more relevant services.
Government initiative of Digital India
Strong digital initiatives by the Indian government and regulatory authorities, such as Aadhar-based identification, eKYC, digital lockers, Unified Payments Interface, and more recently, the mandate for e-insurance accounts, are creating enabling systems for simplification of transactions coupled with an increasing smartphone penetration, huge markets that were not cost-effective to service earlier due to lack of reach and distributor interest in pursuing small-ticket premiums, are now becoming accessible to insurers.
Competitive pressure
As competition intensifies, margin pressures are pushing companies to look at more efficient ways of doing business – whether by reducing costs or improving efficiency. Especially in non-life insurance where contracts are of a much shorter duration than in life insurance, there is a constant need to create differentiators that will enable insurance companies to attract and retain customers.
Access to capital
There has been a mushrooming of incubators and start-up accelerators, which provide financial, marketing and networking support to insurers. In the forefront are large organizations such as Swiss Re, Oracle and IBM who are aggressively funding and supporting InsurTech start-ups, with the objective of benefiting from new solutions and fresh perspectives.
Crop Insurance
- Pradhan Mantri Fasal Bima Yojana(PMFBY)
- Restructured Weather Based Crop Insurance Scheme (RWBCIS)
Insuretech is acting as an enabler for increasing penetration under crop insurance. Internet is one of the examples wherein it is providing a perfect platform for use of technology in crop insurance. All the stakeholders of crop insurance starting from Government, insurance companies to distributor are having an access to detailed information of Underwriting and claim data. The cost of collecting this data through manual form has reduced due to use of internet.
Technology is providing all the critical information to insurers in a fraction of seconds with less cost. Satellite, drones, mobile cameras are highly cost-effective means of collecting data and this cost efficiency is certainly encouraging insurance companies to increase crop insurance penetration.
Distribution
We see that traditional distribution networks are not only economically unviable for insurance firms but are also cumbersome from a customer perspective. Marketing and distribution in today’s age require having an omnichannel presence. The millennials have come to expect 24×7 service availability. They want to have policy comparisons, quotes and policy terms and conditions made available to them in a device-agnostic online platform, at a place of their choosing. An online distribution channel is a low hanging fruit, which also leads to the most coveted commodity of them all, consumer data. Since this segment of digitalization has already seen considerable disruptor activity, any lapses in capitalizing on it can prove detrimental to an insurance firm.
Some of the products like travel, motor and personal accident insurance require very little changes as they are mostly based on prospect information. The intervention required for such products is minimal and the training and exams for such persons could be of a lesser degree than those for a full-fledged distributor. In fact, last year, IRDAI had allowed the general insurance industry to use point-of-sale persons to sell general insurance products. For this, it identified products that are simple to understand, and in which the benefits are stated upfront and are fixed and predefined.
Therefore, at an aggregator level, people must understand that there is huge potential for insurance in India. India still has low, single-digit insurance penetration – despite the number of insured increasing during the last few years. With a population of over 1.3 billion, it is an epidemic. We are incredibly underinsured
To cross-sell personalized insurance, some of the insurers have started looking beyond traditional distribution channels and explored strategic partnerships with newer channels such as retail aggregators (Amazon, Flipkart, etc.) Telecommunication providers (Airtel, Vodafone, Jio, etc.), smart home devices manufacturers (Amazon, Xiaomi, etc.), AR/VR device providers, telematics device manufacturers, sharing economy providers (Uber, Ola, OYO, etc.), transportation providers (IRCTC, bus providers), and messaging apps (WhatsApp, Facebook messenger, etc.). Allianz, for example, has set up a joint venture with Chinese Internet giant Baidu that enables it to apply data about consumers’ online behavior to create customized offers
For example, Acko General has tied up with Amazon, Bajaj Allianz has tied up with Flipkart to offer mobile insurance Etc. Shriram General, Bharti Axa, and Bajaj Allianz has tied up with IRCTC to provide PA cover to Passengers.
With mobile and Web technology, consumers across tier 2, 3 and 4 cities and rural India will have access to multiple insurers and transparent prices. Apart from reducing the cost of delivering the policy, and cutting down the branch network, online insurance selling also delivers transparent information to consumers.
Underwriting
Two lines of insurance that are using more insuretech for increasing insurance penetration are motor and health.
For health, wearable monitoring devices are already very popular among insurers to access live data on their insured instead of relying on health records and claim history. This sort of live data analytics will lead to more accurate risk assessment and pricing and may in turn lead to premium discounts or rewards for policyholders who stay healthy and active.
Similarly, with motor insurance, a device called telematics could be plugged into the car and the insurer could receive data on how the policyholders drive the vehicle, depending on the results, insurers can make the premium adjustment.
A move towards flexible add-on covers of shorter durations will be made possible through the Internet of things (IoT) and wearables. Through this technology, asset usage can be constantly monitored. In the future, car insurance may cover and be priced for city driving and customers would need to buy an add-on cover when going on a road trip.
Claims
Image and video-based systems are expected to help in claims processing, fraud identification, accurate documentation and for notes recognition. For example, research on using the image of a human face to map out diseases and morbidities is currently under way.
Insurance technologies used for increasing insurance penetration:
- Mobile Applications
- Internet of things
- Blockchain
- Predictive Analysis
- Machine Learning and Artificial Intelligence
- Social media
- Telematics
- Drone
- RPA (Robotic Process Automation)
- Cloud Technology
Mobile Applications
Mobile application has become one of the most important tool for increasing insurance penetration in India. Mobile Apps are increasing day by day not only in insurance industry but every company has an application to connect with the clients and customers. It is now a common trend to see insurance companies launching different types of mobile apps for providing round-the-clock (24×7) support to customers and tools that allow for better and swifter engagement with the company. According to the data published in one of the reports, 281 million people in India use mobile internet every day and India has become the world’s fastest-growing market for mobile apps. Mobile Application has become one of the fastest, better and cheaper way to connect with clients. Customer has to download the app either from Android or from Apple IOS and he can manage all the services from this app. An app can provide various services starting from Proving underwriting to claim settlement and many more and all transaction becomes instant in one click. It also helps in paying bills, storing data like insurance policies and various document, check the status of the claim, getting quotes, read articles and blog about financial sectors, get information about various insurance product coming in the market, claims can be reported by uploading picture and one will get the claim amount in the app wallet or account.
However, there are various characteristics which a mobile app can have in order to increase its usage among clients.
- Convenient to use and speedy, faster in processing information
- Customization and Flexible
- Security
- Better customer services
- Features and comparison on various policies
- User experience
- Informative by Blogs and Articles
- Interactive and catchy user interface
- Weather or an event tracking, Geo-location technology
- Easy and quick claim settlement
Health underwriter can also use this for better underwriting. Connected devices and wearable provide deep insights into the customer’s physical condition, like blood pressure, temperature, pulse. Now, the insurer can even explore the client’s lifestyle patterns, such as the number of steps per day, or how often and how long it takes someone to brush their teeth. In addition, all this data is available in real-time, which provides additional value for insurance companies. This will help in reducing premium or taking discounts for insured by allotting scores and points on the basis of risk-taking ability by an insurance company.
Mobile app used by different insurers:
- Reliance General Insurance: Reliance Selfi App
- Shriram General Insurance: Shriram M. Nova, I Nova
- Bajaj Allianz: Insurance Wallet
- ICICI Lombard: Insure
Customer can easily use the above-mentioned mobile apps. These applications ease the claims processes significantly with features like live video calls assistance with claim advisors, renewal of policies with just a tap, quick access to nearby garages, hospitals etc. These apps also allow users to track the claim/service status in real-time. The mobile app also allows users to safely store all their policy and other important documents like Driving License, RC Book, etc. in an E-Doc vault, which is easily accessible.
To be continued in next issue….
