The Indian insurance industry, with the support of InsurTechs, has rapidly moved towards digitisation, adoption of technology, and new distribution channels for reaching customers since the start of Covid. To put the growth of InsurTechs in context, here are a few numbers from a report published by the India InsurTech Association and BCG in Feb 2021.
Global funding in InsurTechs has grown from about $2 billion in 2016 to $6 billion in 2020. In India, too, funding has seen an increase from a modest base of $11 million in 2016 to $287 million in 2020. While digitisation is being embraced by all insurers, 2022 will witness new trends for the next level of tech innovation in the Insurance sector. Here are a few trends:
Automation
In the past two years, we have seen insurers invest heavily in digitisation of distribution, policy issuance and digital customer communication. However, in 2022, we anticipate that insurers will invest significantly in bringing automation to other areas of the insurance value chain such as underwriting, core policy admin systems, risk management and claims. Indian insurers are evaluating multiple initiatives in areas of workflow automation, RPA (robotic process automation) and AI automation.
Automation of these core insurance functions brings a number of advantages – faster straight through processing, less human intervention, ability to analyse and use more data in decision making, standardisation of processes and transparency in underwriting and claims. In the end, the customer would be the biggest beneficiary, as automation of end-to-end insurance value chain would lower expenses and fraud, leading to lower insurance premiums and faster and more transparent underwriting and claims decisions.
Data-driven innovation
The insurance industry is built on the understanding and management of risk; hence, the explosion of available data will result in a golden period of significant data-driven innovation. A combination of cheaper telecom data plans, cheaper devices such as smartphones and laptops, and increased computing power is resulting in an unprecedented amount of data being generated. Right from home sensors to smart televisions to connected cars and smartwatches, a significant amount of data is being generated, which could be utilised for bringing innovation across insurance products and related services.
At present, a lot of the global innovation in InsurTech is based on developing new approaches to underwriting risk and predicting losses. The ability to capture and analyse data from different sensors and sources in near real time opens the door to more proactive prevention models. In addition to the generation of data, standardisation of data through appropriate data standards such as ‘Electronic Health Record Standards for India’ and ‘National Digital Health Mission’ will act as catalysts for driving innovation in health insurance in 2022.
Eventually, the data being generated across multiple industries (insurance, automotive, healthcare) will start coming together through accepted open source data standards and protocols, resulting in more intelligent insights that can help build more contextual insurance products, embedded insurance, automated claim processing and fraud detection.
To take advantage of this promise of data driven innovation, insurers are now ensuring that their actuaries, underwriters and risk managers are now being supported by strong Data Science Teams and Data Engineers. Additionally, insurers are spending many millions of dollars to put into place cutting-edge data infrastructure platforms and customer data platforms, while scaling their data storage and computing power requirements through cloud services (AWS, Google Cloud, Microsoft Azure).
Embedded insurance
Embedded insurance products are sold at the point of sale as add-ons or bundles to other core products or services. Many of us have bought embedded insurance without even realising that we did – travel insurance with your flight tickets or accidental damage insurance for our phones and laptops. For embedded insurance products to be successful, the most important criteria is their relevance to the original product or service. By bundling these insurance products, we build awareness about their benefits with customers while enhancing the overall value proposition and product uptake for customers.
With the rise in the number of digital transactions, embedded insurance products, which meet genuine customer needs, are seeing great adoption in India. In turn, embedded insurance provides insurers and distributors with a more targeted and cost-effective channel to sell these insurance products.
Insurance has typically been a standardised offering without much customisation for their customers. However, the Indian customer is now used to tailored and personalised services and offers, thanks to top e-commerce and consumer internet companies. With the increased availability of data and sophisticated analytics in the area of personalisation, insurers can now create very granular profiles of their customers and their needs. Insurers can use this to create new insurance products for micro segments, tailor coverages, provide better risk advice, and offer customer specific cross-sell and upsell offers.
Additionally, we will see more products being developed for different life stages, short duration byte-sized products, and products that cover very specific risks (Covid-19).
Providing more contextual products is a win-win for innovative insurers as it helps them bring new customers into the insurance fold while resulting in higher premium growth. Increased partnerships between insurers and InsurTech start-ups India is a large underserved insurance market. Partnership between insurers and InsurTech start-ups is promising. India hosts world-class tech talent, data scientists, product managers, actuaries, underwriters and risk managers. InsurTech start-ups are able to recruit the best talent in data, technology, UI/UX and Product Managers to build cutting edge tech stacks. Insurers can spot promising opportunities, develop innovative products, and reach new customer segments through cooperation with such InsurTechs.
We can expect that collaboration between insurers and InsurTech start-ups will unleash the next big wave of innovation to capture and serve a large untapped market for insurance in India.
(The writer is co-founder of India InsurTech Association, and founder of RIA Insurance)