Author: Rana Kapoor, MD & CEO, YES Bank and Chairman, YES Global Institute
This article appeared in THE HINDU BUSINESS LINE – SEP 3, 2018
After fintech, ‘insurtech’ is the next logical step in a series of technological disruptions in the economy, joining the ranks of cleantech, healthtech, agritech, smart mobility and edutech amongst others.
The domestic insurance market with a penetration of ~3.49% is expected to witness hyper growth from its current market size of USD 60 Bn to USD 160 Bn over the next decade. In order to achieve last mile connectivity and deep outreach, it is vital that new age channels of information such as open data are utilized to optimize insurance coverage for all and create niche hyperlocal communities to cater to the ‘on demand’ economy.
Insurtech is currently at the cusp of affecting transformational change and successfully leveraging this disruption will allow this sector to leapfrog to the next level of growth.
First, innovation in insurtech is catalysing the entire insurance value chain with a key focus on enhancing operational efficiencies and lowering cost. By leveraging AI, IoT and blockchain, insurance companies can ensure significant time and cost savings through automated underwriting processes, digital signatures and information assimilation of the insured. This is also critical, as India gears to roll out Ayushman Bharat, the largest health insurance scheme in the world over the next year. A case in point is roadzen, a US based Insurtech Company that focuses on utilizing big data, AI and computer vision to automate processes in order to increase turnaround time and reduction in the overall cost of processing claims.
Secondly, insurtech is introducing new and agile insurance products as well as distribution methods and platforms, which will be consumed in a very different manner in comparison to traditional offerings. With digitization at its core, peer to peer (P2P) insurance models as well as ‘bundled’ insurance offerings will emerge as the new norm for current and future consumers.
It has been projected that by 2020, 75% of insurance policies within India will be influenced digitally. To put this in perspective, 3 out of every 4 Indians will be choosing insurance based on their digital influence, modelling and offerings bundle. For example, having partnered with existing leading insurance companies to roll out its products, the start-up offers diverse plans which can be tailored to suit a user’s requirement via phone support.
Customer is King
Thirdly, insurtech can address the insurance inclusivity challenge by ensuring a transition from ‘product centric’ models to a ‘customer centric’ approach. With the number of mobile internet users set to reach over 475 million in India , earlier bottlenecks such as lack of user information, inadequate access to consumers and differentiated individual requirements can be addressed by analysing this big data through AI and machine learning. A case in point is Zhong An, a China based insurtech start-up that focuses on collating a customer’s online retail purchase history in order to forecast the potential consumer’s risk profile and premium pricing.
Finally, insurtech will not only galvanise digital insurance sales but have a multifaceted 360 degree impact on the risk industry. By introducing digital transparency, data driven insights and real time smart contracts in the systemic process, inefficiencies such as insurance fraud and delayed payments may be drastically reduced. This will also enhance customer awareness, best price discovery and contract renewals. An Indian startup Coverfox has been working tirelessly to prevent insurance policies being sold through fraudulent promises by phone agents. Users can compare, manage and buy new policies from multiple vendors, through the firm’s platform.
The key to enabling a successful insurtech environment is an amalgamation of people, processes and technology. While, fintech has evolved at an exponential pace along with industry 4.0, insurtech is still at a burgeoning stage of development. Further, by leveraging the principles of DICE (Design, Innovation and Creativity-led Entrepreneurship), insurtech is on the fast track to revolutionise the entire risk industry.
A collaborative approach with existing legacy incumbents and a focus on smart customer centric services, bundled with a comprehensive and segmented approach, will build capacity and sensitises citizens towards insurance. It will also help them make informed choices and will certainly move the needle from insurance to assurance.