Insurance Article, The Insurance Times 2023, The Insurance Times January 2023

Insurtech in India

The last few years have seen some prominent changes in the insurance space. The adoption of technology has created a whole new tech enabled business models to disrupt the insurance ecosystem in India. From the early web aggregators to more than 140 insurtech start-ups the insurtech landscape in India is has seen the emergence of several players across the value chain. From the focus on sales and distribution we are seeing a shift in other parts of the value chain as well.Underwriting, claims management, employee benefits, business analytics and insurance administrative platforms are seeing an increase in number of players. Today the use of telematics, Internet of Things, Artificial Intelligence is common usage in the industry.

Over the last few years insurance industry has been forcefully awakened from their slumber due to changes in customer requirements,the obstacles created due to delay in policy servicing, legacy products & process. The industry is slowing moving from a push to a pull and therefore the demand for straight through processing, on demand products and continuous customer engagement. While some of them still prefer to sleep, the majority have realized the need to innovate to build / maintain competitive advantage.

Globally insurers have been early adopters to technology but through the years innovationwas not given any importance hence insurers were left with facing a dynamic environment with legacy systems that challenged operational efficiencies.Meeting business challenges involved high investments to upgrade existing technology which posed a dilemma that resulted in the continuation of obsolete technology and need to innovate. Critical events like COVID -19 forced the insurance industry to fasten the pace adopting a digital path or face existential threat.The slew of activity and emergence of new tech players within the insurance industry is questioning the necessity for insurers to have any physical infrastructure other than IT systems, a IP-enabled computing device  todevelop , communicate ,  distribute products and claims service to customers.

Insurtech refers to the use of technology to create efficiencies within the insurance Eco space. The Indian insurance industry is a regulated industry as other countries with a market size of around USD $ 280 billion. Our penetration is around 4.2% (life insurance is 3.2 % and General Insurance is 1%) with an overall density is around US$ 78 with 58 insurers. These figures look small compared to global averages, but the trend of growth is positive since the last few years. As per the BCG report released in 2021 on the Indian Insuretech environment, “The Indian Insurance industry has seen significant progress with life and non-life insurance growing at 17 percent and 14 percent CAGR respectively, in the past five years. The total number of lives covered doubled from 12 crores to 23 crores during this period

With immense scope for growth for a Trillion Dollar economy conventional channels of distribution have been unable to plug the gap.India is estimated to have a $650 Bn protection gap. Directsales by insurers remains a prominent channel for distribution in India suggesting that insurance has traditionally been a channel sale driven segment.In spite of having multiple classes of intermediaries (Brokers, Agents, Web aggregators, corporate agents + banks,Insurance Marketing Firms)for the Indian market; the market penetration of Insurance for a $ Tn+economy like India remains at nearly 50% of the global average. There could be ways to approach this challenge

  1. Increase the number of intermediaries (brokers, corporate agents etc.) who can have a business model of achieving penetration to underserved markets. The go to market can be digital/ physical/ phygital. The current proposal of an open source network and BIMA SUGAM sems to e a positive step towards increasing penetration and Insurance for All.
  2. Create newer instances/ channels for distribution of insurance products.

The current insurtech environment have an array of Value chain players and New Age Business Models catering to administration models, analytics, product development, underwriting and risk management, claims management, sales, and CRM. Whether you have comparison sites, direct on demand portals, Insuretech ecosystems, health and wellness,Micro insurance and commercial partners, Insurtech will play a critical role in the development of insurance in this country, as customers increasingly prefer the digital way.

Health Insurance :- The pandemic has increased the requirement for on demand health insurance covers which has generated action in the health, employee benefits, wellness space and value-added services space. There is more than 50+ players in this segment. The pandemic has not only been responsible for the driving the growth of the health insurance but also tele medicine and consultation services through the digital platforms.The challenges of attracting and retaining staff has forced the HR to seek advice on the redesign of their organization’s life and health benefit offering. Insurtech startups like Paz Care, Nova Benefits, loop health, Healthy Sure, Kenko, Even etc are innovating with the traditional offering of Employee benefits insurance by offering to Employers special designed policies, efficient claims administration, better policy management and other value added services. These players are working towards improving the coverage offering, creating subscription based access to employee health insurance for small organisation who otherwise cannot get a group cover, improving claims management – automating and easing the claims process by reducing Turnaround time, offering outpatient managedservices, dental coverage etc. These help in increasing penetration through product innovation, providing a more holistic basket of offering besides building a data repository that will help in better underwriting and claims management. The new age insurtech startups are growing in numbers, which is helping to create new opportunities through use of technology but also help increase and improve customer lifecycle management. Adaptation of digital mode by the consumers strengthens our belief that digital is the way forward. Adoption of machine learning and block chain ishelping the sector in creating operational efficiency within underwriting, claims management, CRM.

Motor insurance is an insurance that is mandated by law, and it forms 40% of any insurer’s portfolio. The innovation in this space has ensured a do it yourself approach to buying a motor insurance, thus disrupting the way insurance is being bought by consumers. Insurers are better placed if they offer consumers innovative motor insurance policies and move away from their traditional approach. Using technology beyond chat bots, virtual assistant, and telesales centers to offer consumers a full stack of services from quote generation, authentication, premium collection, and claims intimation – submission and tracking. Product innovation is the key. There is a lot of work being done on risk-based solution products is the way forward. Insurers are designing or a made to do so by intermediaries, products based on telematics behaviorfor a scientific calculation of premium. Pay as you use and pay how you use will help consumers pay considerably less than a conventional plan. Option of purchasing a single policy for a fleet of vehicles also eases administration.

Claims Management and Fraud mitigation: Insurers are under pressure to adapt technology to improve the customer experience with respect to claims. Integration of Artificial intelligence in easing claims administration and faster claims settlement seems to be the need of the hour. Automation improves efficiency, reduces costs, filing of claims from anywhere, anytime, minimize fraud and enhance client satisfaction.

Embedded insurance refers to bundling of insurance coverage within a product or service itself, offered at the point of sale or service. Conventional channels of distribution have been unable to plug the gap. Industries like hospitality, travel, tourism, mobility, and housing are set to reinvent themselves as digital ecosystems. Embedded Insurance, via bundling of insurance products with the core offerings of industry players can help to increase insurance penetration.Global precedents have shown that the embedded insurance model works well for enterprises to differentiate the core product/ service offering, act as a source of revenue and offer a source of competitive advantage. India is estimatedto have a $650 Bn protection gap.Enterprises, Regulators, Distributors and Insurers alike need to work together and create an environment where it is easier to innovate in this space. Embedded insurance will enable insurers to address the protection gap and increase penetration seamlessly through B2B2C. Embedded system also substantially reduces acquisition costs. There are 3 models an insurer can choose from:

  • Related embedding: offering insurance in the partner’s own digital universe.
  • Linked embedding: turning the partner’s point of sale into an insurance sales channel.
  • Bundled embedding: Customer buys multiple services including the insurance with one click. It is popular in the automotive industry where car finance, car service, and car insurance are bundled in an all-inclusive offer. The bet today is on embedded insurance

Conclusion: To create an ecosystem for insurance companies, insurers need to expand partner network and drive additional business through the API driven technology – You have APIs single point of sales (marketplace) where your API is hosted or multiple Point of sales where APIs from multiple companies are hosted and you are one such insurer. The information that is hosted on these API’s differ in type. In single point API you need to support basic information for the transaction to be completed but when you are on multipoint API the challenge is to be as transparent as possible on pricing , coverage’s to have the competitive edge . Your API is of no use if it does not create a “win-win” monetization scenario for yourself and your partners.Hence it’s just not the API concerned its also how to create a competitive advantage using APIs

Insurers have to believe in a truly mobile, digital environment, and that no insurance carrier should require a physical infrastructure to interact with outside counsel, a network of automobile repair/body shops, external public relations firms, marketing communications firms, full-service marketing firms, property remediation firms, or physical rehabilitation.

Insurers must adapt newer forms of technology and innovate on traditional practice. The use of Internet of Things, Artificial Intelligence, Machine Learning, Big data and connected devices which are driving other sectors will drive Insurance too.  To understand risk better insurers,must rely on Data analytics and PredictiveModels, Underwriting can immensely benefit from Artificial Intelligence and Machine Learning can help insurers underwrite risk effectively. Embedding insurance through wearables can play a crucial role in underwriting in both Life and Health Insurance.Telematics and IoT devices can help track driving habits.  IoT and AI can help in fraud detection.The advantages of adoption to technology outweighs any disadvantages if any as its help’s insurers drive excellence across the valuechain, personalize product design,become, proactive risk managers.While disruption is not always welcome in a regulated industry, there is no looking back now.

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