Internet of Things
With the traditional view, the general insurance industry is always viewed as an industry, which financially compensates individuals and organizations for losses incurred by them. However, the biggest challenges faced by insurers are claim valuation. The process is very tedious for almost all the insurers because of the amount of data that needs to be analyzed before paying a claim. Customers also face long processing times, especially after dealing with a financial loss. Furthermore, there is always a high probability of fraudulent claims, which necessitates a rigorous validation process. IoT can be helpful in eliminating such issues. IoT sensors can be used to track key parameters on an insured person or object. If the object of insurance is a person, they can be given wearable devices that track basic health parameters over time. In the event of an insurance claim, the recorded data can help prove allegiance to clauses in the insurance policy. In the case of auto insurance, a car that is insured is fitted with sensors and on-board diagnostics (OBD) systems to monitor the performance of the car. These parameters will help the insurer to assess the premium that the driver will have to pay, with lower premiums for safe drivers. In the event of an accident, this data can be relayed immediately to the insurer and to the emergency services for a timely response. The insurers can immediately validate the case and pay the insured amount to the customer. This tech-centric approach is highly reliable for legitimizing claims and eliminating the possibility of fraud. The above mentioned is an example of reactive way of dealing with IOT. We can also use this as proactive way. For example, in motor insurance, the data on the vehicle’s real-time position and performance, traffic and weather data, the driver’s behavioral data, will all be processed through machine learning algorithms. This will lead to the prevention of accidents through valuable feedback to the driver on his driving and vehicle maintenance.
Blockchain Technology
Blockchain is a technology, which can save anything from assets to electronic cash. It has defined ledger that can record transaction, track fraud, reduce and cut cost from underwriting and claims. Blockchain can influence existing business model. However, on the other side of the page, it has many benefits such as in help in reducing human error, detecting frauds claims, increase efficiency, better communication between various insurance departments and many more. Distributed Ledger Technology (DLT) can be useful in sharing data with each block contains a hash (a digital fingerprint or unique identifier), time-stamped batches of recent valid transactions, and the hash of the previous block. The previous block hash links the blocks together and prevents any block from being altered or a block being inserted between two existing blocks. In this way, each subsequent block strengthens the verification of the previous block and hence the entire blockchain. The method renders the blockchain tamper-evident, lending to the key attribute of immutability. In this, anyone can write and new blockchain and anyone can see it in that connected network. The claims process will become more transparent.
It has been adopted by the insurance industry as blockchain has improved transparency and reduced processing times: Tokyo Marine, a Japanese P&C insurer, tested blockchain for marine cargo insurance certificates. It reportedly reduced the time it took a shipper to receive an insurance certificate by 85 per cent. Insurers can unlock trapped value by combining blockchain with other technologies, too. Accenture has developed a blockchain-based proof of concept that leverages data from smart sensors to enable smart-vineyard insurance. Bajaj Allianz recently launched a blockchain-based travel insurance app Travel Ezee, which pays out claims automatically when there are flight delays. Like for example, if you have a travel insurance and you are going to the airport, and suddenly you get the information that your flight has been cancelled. Now there is no need to lodge a manual claim and fill up a claim form, the claim amount will reach your account as soon as your airline operator inform you about delay or cancellation of your flight.
Some of the key blockchain use cases explored by insurers across the globe include death claims management, reinsurance contract management, parametric products (event-based insurance products) and identify authentication. Roughly, 60% of the insurers interviewed said that blockchain adoptability would increase in the market, especially when the ledger is owned and moderated by a third party like the regulator or reinsurer.
Predictive Analytics
It is a tool used in collecting and analyzing data from various sources. This technology helps in managing the risk more efficiently and effectively. It predicts the behavior of the insured with the help of big data. Data can be collected from various sources like smart devices, agents, customer quotation, geographical tracing devices, criminal records, credit history, etc.
It also helps in determining fraud claims. It analyzes various factors in determining the type of loss for example location, sum insured, tenure of the policy, age, income, nature of injury, education etc. This will helps in scoring the claims with the help of flags or numbers based on the chances of risk involved. This will give second chance for claimant to assess the claim of any with the help of similar outcome that happed in the past. It is also helpful in expense management and trend analysis. This kind of technology helps in collecting, analyzing and accessing the data.
For Example, Mutual Liberty Insurance investing in various technologies to manage the risk. They investing in infrared cameras to better understand and access the extend of damages.
Artificial Intelligence and Machine Learning
Text Analytics and Natural Language Processing are two of the major AI changing the way insurance companies provide client services. Customer mobile apps and websites are now equipped with chatbots that can hold a meaningful conversation with the client any time of the day. Audio, Video and Images are also helping in claims processing and enhance customer satisfaction in a faster way. It is used during the time of inspection and system can automatically assess the risk and can convey the rates and charges to cover the risk. AI-powered claims could also fight against one of the most costly elements of the insurance industry: fraudulent claims, which cost the industry more than $40 billion a year. Instead of relying on humans to manually comb through reports to catch inaccurate claims, AI algorithms can identify patterns in the data and recognize when something is fraudulent.
Several customer interaction functions can be conducted through AI-based chatbots and voice/speech recognition algorithms. Most leading Indian insurers such as Bajaj Allianz, ICICI Lombard, and Shriram General have deployed chatbots for servicing and other customer functions.
Telematics Insurance
Telematics is a device, which monitors the vehicle by using GPS system. Telematics is derived from Telecommunication and information processing. It helps in providing information to insurance companies. The information can be recorded by a device called black box. Various components of black box are GPS receiver, SIM Card, Engine Interface also it use various algorithm for GPS Logging. A vast amount of data can be collected using black box like speed of the vehicle, distance, time travelled, battery voltage, engine data, number of vehicle on road, weather condition, type of road etc. This can be installed in various motor vehicle like school buses, commercial vehicle, trucks etc. This information is then stored in cloud.
There is an open system telematics which is capable of integrating other devices also like mobile apps, hardware accessories etc. Telematics helps in improving customer services, adjust premiums for insured, efficient decision making while underwriting, optimize the maintenance of vehicle, it can provide accident information, safe-unsafe areas, level of risk involved etc.
Drone Technology
Insurance industry is already deploying and expanding the potential of commercial drones. In Insurance, drones are used for better risk management through improved data collection and other one is reduced operational costs through improved efficiency and effectiveness related to claims.
It has features of capturing high quality pictures from bird eye-view and recent advancement in drones involved audio video facility, which has made easier for insurance companies to assess risk where it is impossible to visit by physically.
It is mostly used in agricultural purpose to collect information on crop conditions. Drones can help in predicting claims more effectively. It can improve the speed with which customers receive settlements and give claims managers a better sense of where and how many staff should be deployed. This can be used at all department of insurance from underwriting to claim settlement.
Drones can be used to collect information about a property before a policy is issued by capturing data on property features that make it less vulnerable and this can facilitate personalized premiums as well.
Robotic Process Automation (RPA)
RPA (Robotic Process Automation) is a tool, which can help any organization to automate the task which consume a lot of time and which are repetitive in nature. As the insurance industry is developing very fast and process becoming more dynamic and complex therefore it is also becoming challenging for the back off staff to manage their task and work is becoming monotonous for them. In addition, manual work increases the chances of error by 60%. RPA can perform task like data entry, capturing, copying, pasting, analyse the risk percentage, flagging the high-risk business etc. RPA will carry out the job more effectively, efficiently and consistently.
Underwriting: RPA can be useful right from the underwriting level as it can help in making the policy itself by analyzing the quotation and can also assess the risk by grading/crediting the risk level of the quotation by using previous data. RPA can collect the data from multiple sources and scan the similar type of risk based on various factors.
Claims Management: By using RPA, claims can be assessed automatically by using previous records of similar case. It also helps in calculating claims efficiently. It will help in improving claims registration process. It can help in sharing of daily report with the management.
Client Servicing: It will help in quick issuance of policy and faster claim settlement, and for company, it will provide efficient data management.
Source: Automation Anywhere
Digital Offices and Innovative Insurance Products
Innovation can come in different forms, from policy disbursement to claim and settlement, enhancing customer experience, while being an enabler to achieve scale. It is also enabling insurers to move ahead and create digital offices, where salespersons could sell insurance policies via mobile and complete the processes within minutes and hours, instead of the numerous s that it used to take earlier.
Insurance product development companies are designing innovative products like Cycle Insurance, Dengue Insurance, Daily Commuter Insurance, etc. Giving wider options and flexibility to customers to choose as per their needs and specifications is spicing up the insurance market. This is simplifying the products and making them reach to customers like never before. Insurance companies are not only dependent on bancassurance, agency or direct sales channel to sell these products, but also some of the channel like web aggregators, Amazon, Flipkart are creating collaborative approach to sell products in untapped market segment. In the next five years, an estimated 500 million first-time internet users are expected to come online via mobile: The Next Half Billion. India has a young, growing middle class, with an increasing awareness for the need of protection and retirements planning, which will support the growth of Indian insurance.
Role of Government Sponsored Socially Oriented Insurance Schemes
- Pradhan Mantri Jeevan Jyoti Bima Yojana(PMJJBY)
- Pradhan Mantri Suraksha Bima Yojana(PMSBY)
- Life Cover under Pradhan Mantri Jan Dhan Yojana (PMJDY)
- National Health Protection Scheme
Government is also working as a catalyst and launched few social welfare schemes like Pradhan Mantri Jan Dhan Yojana (PMJDY), Pradhan Mantri Suraksha Bima Yojana – PMSBY (for accidental death and disability) and Pradhan Mantri Jeevan Jyoti Bima Yojana – PMJJBY (to cover life). More importantly, the government has pushed insurance as a risk management mechanism as Crop Insurance through Pradhan Mantri Fasal Bima Yojana (PMFBY) taking insurance to all the farmers.
At present around 40 per cent farmers are covered under PMFBY and it is expected that by the next 3-4 years 60-70 per cent of farmers are going to be covered through this crop insurance scheme thereby addressing the major problem of ‘rural distress’, which India has been facing over the decades. As 20 per cent of the premium in the non-life sector is funded and driven by the government, the challenge for the insurance sector is to manage these insurances well, delivering value to the rural beneficiaries and making the schemes sustainable
Role of IRDA in Increasing Insurance penetration (Through Insuretech)
Motor insurance is mandatory as per Motor Vehicles Act but about 60 to 70% of two-wheelers and 20% of cars are uninsured despite it being mandatory. This happens mainly due to lack of reach and distributor interest in pursuing small-ticket premiums. “Consumer surveys show that while most consumers want to insure their bikes, they are currently clueless about where to find an insurance agent or insurance branch office to get this done.
IRDAI has also allowed insurance intermediaries such as brokers to sponsor the training and certification of POS agents. “With increased use of digital mode… there was increased focus on point of sale products and simple to use channels to increase penetration of general insurance products in sub-urban and rural areas, IRDAI too has taken initiatives to innovate with distribution channels like Point of Sales (POS) and Common Service Centers (CSC), so that simple pre-underwritten products with lesser/minimum sum insured could be sold in villages and other small towns and cities.
The technology has played a very important role in appointing POS and CSC agents. Most of the Insurers have done an API Integration with these Common service centers to ensure fast issuance and delivery of insurance policies. Through the use of technology now Insurers can appoint POS agents very quickly, They can pass their exams very easily through the use of insurer’s mobile app. Some of the Insurers has started providing training to staff of schools and colleges, NGO’s, post offices, banks, panchayats, other trusted villagers and local language speaking engaging them for solicitation of insurance products in their respective areas. We know that insurance has been largely a ‘Push’ product. Innovative seamless distribution and servicing of Insurance products to rural areas and to the majority of households is the key to penetrate these markets.
New IRDA’s Regulation allows Insurers to solicit business through the Insurance self-network platform of an intermediary.
Insurance self-network platforms: denotes the online portals (websites) and mobile applications for selling and servicing of insurance policies.
The majority of insurance products in India are sold through agents and the customers always see it as a ‘push’ product. Many times, the distributors push products without explaining the benefits and limitations of the policy, leading to a high dissatisfaction ratio amongst the customers, but now at the time of issuance of Insurance policy, IRDA has made it mandatory for insurers to share proposal form, Policy wordings and other relevant documents with insured. As per New e-commerce guidelines, insurer has to share OTP with Insured to get his acceptance on the proposal. Insuretech has played an important role in delivering OTP, soft copy of proposal form and policy wordings to insured.
Who can operate such platforms?
All insurers and intermediaries such as corporate agents, Brokers, IMFs and Web Aggregators etc. can operate such platforms. Permission of IRDAI is required for operating on such platforms. Products, which are approved under File and Use, can be sold through self-network platforms.
If we go into the era of pre-internet times, we can easily remember the hassles that we had to go through to purchase an insurance policy but today, things have changed for the better with the boom of the Information Technology in insurance sector, Instead of having to hire local insurance agents or go to any insurer’s office, one can simply go and access the website of a recognized insurance web aggregator Like Policybazzar, Policyx to compare various insurance policies offered by different insurers. Customer can see all the competing features, costs and coverage displayed on a single screen.
Insuretech Advantages:
Cost Reduction: With the help of insurance technology, insurance companies have started using various innovative means to decrease the overall cost base required for risk cover in insurance. This is being done specifically by addressing and mitigating the moral hazard and morale hazard aspects to customer behavior and through that, reducing instances of preventable claims.
Better Customer Experience: Consumers often complain about lack of understanding and transparency while buying insurance, insurance technology has introduced Customer ease in buying insurance, Now Customer can purchase insurance policy instantly through digital mode.
Insurance technology is trying to replace traditional agent’s job wherein his main job was to explain policy exclusion and other important by using a mix of technology and in-house experts.
Product the customer will be willing to buy based on the past digital interactions of the customer. In addition, with big data capabilities, based on customer behavior, the website can be customized in real time, leading to enhanced customer experience.
Customer Segmentation: Advanced analytics techniques can greatly help in arresting customer churn. Predictive Modelling techniques can help predict customers who are likely to surrender their policies in near future. With such insights, the marketing team can prioritize their interactions.
Employee Productivity: Big data infrastructure can significantly boost employee productivity by providing them the Right data at the right time fore.g., if an agent can access all previous interactions between the prospect and the firm, s/he will be better equipped to convert the prospect.
Fraud Detection: Big data capabilities has enabled insurers to store huge data volumes obtained through its own sources and through third parties. This data is getting used to detect various fraud indicators, fraudulent customers, agents, employees, hospitals, doctors, drug stores, etc.
Customer Service: Customer service can be greatly enhanced by using a combination of big data and advanced analytics capabilities. Techniques such as text analytics on unstructured customer email data can identify common pain point themes so that they can be addressed proactively.
Way Forward: The rise of digital technologies in insurance has forced insurers to look at remodeling their current products. The traditional ‘one product for all’ approach will not work well in the future.
Insurers will have to offer low-priced products for specific and need-based coverages like for example (usage-based insurance) a pay-per-mile motor insurance product with price determined on miles that one drives or an event-based insurance. These products are designed to cover only a specific event. For example, a customer might be interested in personal accident coverage while taking a lengthy ride share. Insurers could also look at finding ways to bundle and create customized packages or product offerings for the appropriate customer segments. Many insurers across the globe are bundling group benefits with accident and health coverages. Product packaging also holds a lot of potential for the SME insurance market, given its diverse segments.
To increase the low insurance penetration in India, Insurers should also look at developing new products for new-age risks like the liability risks associated with using digital services across the sharing economy and liability/physical damage risks associated with the use of drones or smart devices.
Insurers should also explore Aadhaar-based biometric authentication for faster customer onboarding and cashless payment processing gave the rise of mobile payment modes (Paytm, UPII, etc.). They can also look to integrate with digital data sources/aggregators such as third-party digital lockers used with government or medical records for automated data entry. Insurers should also look at collaborating with established digital players in the rural segment and leverage their established digital platforms for insurance distribution. For example, insurers could consider integrating with digital TVs, mobile apps and bank ATM technologies and leverage those platforms for their selling and operations.
Indian insurers must increase their focus on restructuring talent pools and upskilling their human resources. Skills are clearly a fundamental factor in creating new digital services. Insurers must therefore identify the right skills required and should look to leverage digital tools such as social media sites to attract today’s younger workforce.
Conclusion
With the rapid use of smartphones, the majority of Indian population is now tech-savvy. The modern Indian is a digital native and has variant lifestyle needs. By 2020, India will be the youngest country in the world with an average age of 29, so it is vital that insurers start considering the unique needs of this demographic. Modern Indian youth are not interested in those policies, which do not speak to their lifestyle. The traditional way of providing insurance cover may no longer yield optimum results. The traditional offline model is broken, difficult, and expensive. Digital partnerships, which allow the insured to see and protect their risks, will lead. It is very much clear that the problem of low insurance penetration can only be solved through the use of insurance technology. For eradicating the problem of low insurance penetration, It is very important that customers are protected and treated fairly and provided the right and quality products according to their needs.
Technology-led disruptive ideas are essential in changing the face of insurance business and can make a huge impact on Insurers. “According to a Boston Consulting Group (BCG)-Google report, by 2020 every three in four policy purchases will be influenced by the digital channel. Insurance is a highly competitive industry and not traditionally known for innovation, changes in demographics and business models are creating significant new opportunities for insurance companies to defend market share and increase revenue and margins. The need to innovate, and to do so quickly, is now deemed critical by most of the insurance companies.
By 2020, about 315 million Indians in rural areas will be connected to the internet, compared to around 120 million at present, according to a study by BCG: The Rising Connected Consumer in Rural India. Technology has played an important role in giving boost to several sectors like e-commerce. However, in e-commerce, the current IRDAI’s regulations do not allow discounts when selling insurance. IRDAI; the regulator should allow differential pricing for products sold through insurance self-network platforms.
The latest regulations issued by IRDAI on e-commerce has removed tedious processes such as physical signatures, by bringing in digital signatures and other authentication methods like one-time passwords. IRDAI should also launched “Insuretech Sandbox” to facilitate pilot trails on Insurance technology. This Insurtech Sandbox should allow Indian insurers to experiment with new technology without the need to achieve full compliance with the IRDAI’s usual regulatory requirements. Under the Sandbox initiative, pilot trials of Insurtech applications should be conducted in a controlled environment with sufficient safeguards for policyholders.
One must understand and be aware of insured’s risk for providing desired coverage. Insurance is and will continue to be a push-product. No one wakes up excited that they are going to buy insurance today, but insurers should change that perception. If customer has a fitness goal, so he should get a policy with their gym membership. If customer is commuting between Delhi and Noida for his new job, insurer should have policy to cover the commute. The future of insurance distribution lies in creating that context.
In short, we can say that future of insurance in India is very bright and big thanks go to the Government of India for their digital initiatives like “Make in India” and “Start-up India”. The credit also goes to the regulator (IRDAI), who has brought new e-commerce guidelines, POS concept and concept of Web Agregators. The above-mentioned initiatives have played a very important role in increasing insurance penetration in India.
