Propelled by the Digital India initiative and with the Covid-19 pandemic acting as a catalyst, India is undergoing a digital revolution. This trend has been best reflected by the widespread adoption of the Unified Payments Interface (UPI) for digital payments. With the spread of use of smart phones and more than 600 million active internet users it is becoming easier and convenient for businesses to access potential customers.
The domestic insurance sector has also been impacted by digitisation. Not only Insurtechs but established insurers are also taking recourse to new and innovative technologies such as AI, IoT, APIs and Big Data to ramp up their offerings.
India’s insurance market is valued at USD 131 billion as of now. It is also expanding at a CAGR of 17 per cent. The current trends indicate that digital penetration in India is growing and it is contributing to growth and innovation in the insurance sector. It would not be incorrect to expect that Insurtech will play a significant role in the future development of the domestic insurance sector.
The Bima Sugam Initiative
Reports indicate that very soon, the Insurance Regulator, IRDAI, will be unveiling a one-stop online platform for policy sales, renewals and also claims settlements for both life and non-life insurance. This on-line portal is in the making and will be referred to as Bima Sugam. The intention of the Regulator appears to be utilizing the trend of increasing digital penetration to make it convenient for customers all over the country to purchase insurance through the online mode. This tech-driven portal is also expected to boost insurance penetration in the country, which is now 4.2 per cent as compared to a global metric of 7.40 percent. Thus, Bima Sugam will not only be a web-aggregator with government backing but also provide many additional facilities.
Customers will be able to choose from a variety of products, insurers and payment options on this platform. Both underwriting and renewals will be possible through this portal. Hence it will be of assistance to customers and help reduce some of their pain-points in the journey of insurance. The portal will require KYC authentication which will be done through Aadhar. This will ensure security and confidentiality of the information related to identity.
As a one-stop shop for buying and selling insurance, for policy servicing and also for claim settlement Bima Sugam will now take off from where the growing tribe of numerous online insurance web-aggregators have been active. (Insurance web aggregators collect, compile, and provide information about different companies’ insurance policies on a website. They act as intermediaries between the insurance companies and prospects who wish to purchase insurance policies. Example: Policy Bazaar, TurtleMint etc.) This portal will be shared by insurers and agents, brokers and web-aggregators. Agent portability will also be available to online customers.
This new online-aggregator is expected to disrupt the insurance distribution business in India and is in conformity with the regulator wanting to digitize insurance distribution and level out the playing field for all insurers, online. Whilst the platform may disrupt distribution in a big way, a large section of customers will still need help from offline modes of distribution like agents, banks and last mile financial inclusion partners. Hence, this option will also be available for those customers who would prefer the assistance of intermediaries.
Insurance Repositories in Bima Sugam
The policies purchased will be stored digitally with insurance repositories such as CDSL and NSDL in a e-insurance paperless account (like a demat account) for easy viewing and convenient claims servicing. (Insurance Repositories are registered by The Insurance Regulatory and Development Authority of India for maintaining data of insurance policies in electronic form on behalf of insurers.) Thus the process of using dematerialized insurance policies would be encouraged.
This would reduce fraud and eliminate misplacement of documents. It would be possible for customers to go online and view the policy documents related to their insurance cover, be it life, vehicle or medical insurance conveniently. They would thus be able to set their own electronic reminders for renewals and maturity and not have to depend on anybody for renewing their policies in time.
The stakeholders in Bima Sugam
The pattern of stock-holding in Bima Sugam is as follows:
Life Insurance Council (30%)
General Insurance Council (30%)
Online PSBs (35%)
Brokers Association (5%)
Several insurance companies (both general and life insurers) would become major shareholders in the Bima Sugam platform as the Life Insurance and General Insurance Councils are representative bodies of life and non-life insurers respectively.
Online PSBs is also one of the shareholders here. On-line PSB is a government initiative – a new-age digital lending platform – that aims to enhance the credit off-take for the MSME sector and individual entrepreneurs. Their platform integrates advanced technologies like AI (Artificial Intelligence) and ML ( Machine-learning) to automate and digitize the lending processes for borrowers and lenders and provides technology-based financial innovations and solutions. It is also known as The 59 minutes Public Sector Banks(PSB) loan scheme as it enables the borrowers to receive their loans within 59 minutes of submission of all the required documentation. Thus it has leveraged technology to usher in speed and simplicity in availing loans that have perennially been pain points for the Indian borrower. With an impressive track record of having created a new benchmark by providing digital approvals for business as well as Retail loans within 59 minutes, this Fintech company has been incorporated to utilize their technical expertise to put up this online platform.
How will the Bima Sugam portal work?
The portal will promote end-to-end digitisation of the insurance-selling ecosystem. It will take off from where the current aggregator portals such as Insurance Dekho, PolicyX.com etc. have proliferated and provide an enhanced experience for customers. The repositories – CDSL and NSDL- will help maintain the insurance policies of the policyholder and his family digitally. Policyholders will view their policies in their E-Bima or E-insurance accounts and file a claim, as required. At the risk of repetition, it may be reiterated that the availability of all the information in a single place will make the claim settlement process convenient for nominees/beneficiaries. Moreover, the portal will also help individuals who may be apprehensive about sharing their contact details with private aggregator portals to obtain premium quotes.
This portal is the result of innovative use of technology in insurance. This is nothing other than InsurTech which may be described as the technology that lies behind the creation, distribution and administration of insurance business.
The need for Bima Sugam Portal
This new portal would serve some long-felt needs in the burgeoning insurance industry in India. They are as follows:
- First and foremost, this portal would help to stem the tide of increasing complaints from customers regarding mis-selling and lack of transparency. Data available with the Regulator, IRDAI indicates that banks and insurance brokers received 12,300 and 10,800 complaints, respectively, related to mis-selling in the financial year 2020-21 and that 68% of complaints were rejected in the same financial year. Lack of transparency in communication was contributing to mis-selling.
Customers have always had apprehensions in purchasing insurance due to its complex terms and conditions which were not clarified to them prior to sale. Be that as it may, customers would feel more confident in purchasing insurance from Bima Sugam as the portal would be directly monitored by the Regulator.
- Secondly, even as the direct online mode of purchase would be available in Bima Sugam it must be acknowledged that most customers in India do repose faith in insurance agents. The human touch is still relevant in the process of sale. In this background, the Bima Sugam portal will also provide the assisted mode of purchase of insurance products where the preferred agents or brokers of customers would have an important role to play.
To assess the volumes of business brought in by agents; in life insurance business for example, tied agents remain the mainstay of the distribution network as more than 58% of business is coming through this channel as compared to 29.03% through banks and only 1.58% through digital channels. So, Indian customers still repose faith in the distribution network of insurance agents though it has numerous shortcomings.
However, much of the growth of life insurance business takes place due to churning of policies by insurance intermediaries. Under such circumstances, if customers are empowered to switch agents (agent-portability facility being provided by the Bima Sugam portal) it will compel agents and insurers to take better care of their existing customers. This will result in policies being sold to customers as per their requirement and agents not making a windfall at the expense of misinformed customers.
- Thirdly, with technology eliminating distributor margins, the customers will benefit by enjoying cheaper premiums. It is expected that premiums on the Bima Sugam platform for Life Insurance should be 25 per cent less and General Insurance should be 10-15 per cent less, respectively. It is likely that the Regulator may also provide further discounts for the policies purchased from the platform to encourage use of this platform.
- Lastly, the process of renewals is often quite irksome for customers. Digital processes and less manual intervention should contribute to making the renewal process fast and seamless for the policyholders and eliminate the hassles of physical paperwork and visits to insurers.
How much of a disruptor will be Bima Sugam be?
To respond to the poser, raised in the title of this essay, it is evident that the Bima Sugam portal will leverage technology albeit with many differences from the existing web aggregators in the field. By retaining a human touch with a digital approach for internal and customer-facing operations it is very likely to be a disruptor in the arena of web-aggregators.
Generally speaking, an insurance aggregator may be defined as an insurance intermediary with an insurance broker’s license who operates an online platform, whether hosted on an Internet website or available as a smart device application, which provides price comparisons and facilitates the purchase of insurance on behalf of insurance companies. Thus insurance web aggregators collect, compile, and provide information about different companies’ insurance policies on a website. They act as intermediaries between the insurance companies (insurers) and people who intend to purchase insurance policies. Insurance Web Aggregators are allowed to sell Life, General and Health Insurance products through online and distance marketing modes. Web aggregators have to adhere to prescribed eligibility criteria and are licensed by the Regulator. As of 31st March, 2022, there are 25 numbers of insurance web aggregators licensed by IRDAI. Some insurance web aggregators are InsuranceDekho, Coverfox, PolicyBazaar, GIBL, PolicyX, ComparePolicy etc.
As far as claims are concerned, web-aggregators guide customers through the process of lodging their claims with the insurers and even pursue claims on behalf of customers, to some extent. But the Bima Sugam portal goes a step further and will also allow for claim settlement through the portal. No doubt, this is an ambitious step and will provide respite to customers from the current process of claim settlement which is long and cumbersome. For example, by ushering in the process of electronic claims which would possibly include a paperless claim form generated by computer software that is transmitted electronically over the smart phone or computer to an insurer in place of a manual claim form it would save time on part of both the customer and insurer and streamline the claim process.
Filing claims electronically can offer a number of benefits, such as :
- Minimize disruptions to cash flow- Claims submitted electronically will be processed more quickly, resulting in faster payment.
- Monitoring claim status- It allows for verification of the status of the submitted claims via a secure Internet connection, by day and night.
- Increases accuracy and cuts down on claim rejections- While paper claims are often rejected due to inaccuracies or omissions etc submitting claims electronically can result in fewer lost or incomplete claims.
- Cuts down the paperwork- Electronic claim submission eliminates the need to fill out and store paper claims and simplifies record keeping.
Web-aggregators so far active in the field, will possibly have to take a back-seat to Bima Sugam at the initial stage. It remains to be seen how they evolve after the launch of Bima Sugam, since their playing-field will now be much more competitive. With its enhanced features and the intention of allowing on board other intermediaries such as agents, brokers and web-aggregators Bima Sugam may be termed a super-aggregator site with the additional feature of government backing and supervision. It would not be over-optimistic to assume that it is bound to generate confidence amongst customers and generate impressive volumes of business.
The Bima Sugam portal has generated lot of expectations from customers. However, its launch appears to be delayed as it was originally scheduled to go live from the beginning of this year and it is yet to be launched. It is to be hoped that this portal is launched soon and ushers in a new era of convenient digital purchase and faster claim settlement for customers.