Redefining Insurance:The future ahead…
Article Synopsis :
This is the second of two insurance focused papers concentrates on the innovation that is already taking place in India.
It acknowledges the growing population increases – 1.35 billion by 2020 –the opportunity, but insurance penetration is still only around 4%, though expected to grow to US$280 billion by the end of 2020.
Foreign investment has increased, thanks to a change of legislation and there is a great opportunity for Indian insurers to transform their business model (identified as broken in the Pahle paper ).
Distribution will be helped by digitised underwriting and allow insurers to expand their target market. It will also improve efficiency and reduce turnaround times and importantly, claims settlement.
Analytics is identified as a key component of expansion and competitive advantage, but where must insurtech improve to allow the industry to be transformed?
Rise of the machines
Chatbots have been used for some years, but it is now possible for them to engage with more relevant – and convincing – dialogues and are being deployed in Indian insurers like bankbazaar.com, policybazaar.com and easypolicy.com.
“With natural language processing and artificial intelligence, the chatbots are able to hold more intelligent and pleasant conversations all through the day and night,” says the paper.
Providers like Singapore’s DBS are working with speech recognition to enable customers to pay bills by talking to the system.
Get it on
Wearables have been adopted in India as elsewhere across the globe and is growing rapidly.
Cigna TTK Health Insurance launched a pay as you workout product that reduces the premium according to how many calories the customer burns.
Telematics have also allowed Bajaj Alliance to launch a pay as you drive motor policy.
Data lies at the heart of these products and allows more accurate risk predictions. In return, the consumer benefits from lower premiums.
US based health insurer Oscar rewards its policyholders with US$1 per day if they walk a target number of steps. It also offers video calls with doctors, free checkups and cash incentives for having a flu shot.
All together now
Insurtech also allows for a new type of risk pooling, based on a peer to peer model. This allows risk – and the fund to cover claims – to be pooled among a group of people who know and trust one another. Any unused cash can then be paid back to the member of the pool.
This may prove to be successful for those groups who are aware of the need for insurance – all businesses, urban dwellers – who are looking for what they consider better value for their premiums.
However, NGOs and government agencies might use P2P insurance collectives as part of the financial education that is required across the nation, in particular in rural areas.
Time for a change
The age of the machines is here and Indian insurers must adopt insurtech if they are to survive. Manual procedures can not be retained if they hope to grow their business to service the market that awaits them.
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Digital Insurer's Comments
- Distribution of insurance products has stagnated as the infrastructure fails to service many areas of the potential market
- Digital innovation would transform the industry
- A new distribution model should make use of digital and social partners such as NGOs, allied with a programme of financial education
- Regulation must also adapt and work with the industry to ensure protection doesn’t come at the cost of customer experience
Indian insurers have much work to do to turn around a stagnating industry. This paper offers some suggestions and calls on the regulatory authorities to also step up to the plate in order to extend insurance coverage on the sub-continent.
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